Sadler & Hovdesven, P.C. | 12 Ways to Protect Yourself From Investment Fraud | Securities and Commodities Arbitration and Litigation

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Introduction

Stick with a name you know or a trusted professional.
Check into the backgrounds of the broker and brokerage firm.
Beware of the broker who tells you that he only makes money when you make money.
Be wary of a broker who wants to liquidate your blue chip holdings or steers clear of blue chip stocks in order to invest in lesser-known securities.
Never do business with a broker who offers to sell you a position in a hot initial public offering (IPO) but only on condition that you agree to purchase shares in aftermarket trading.
Do not allow your broker to hold you in a stock when you want to sell.
Hang up on any broker who wants you to buy or sell a security based on inside or private information.
Do not overstate your income, net worth and objectives and ask for a copy of your new account information form.
It is very easy to lose money on small-cap or bulletin board stocks.
Be wary of the brokerage firm manager who promises special treatment to make up for losses you have suffered at the hands of one of the firm's brokers.
Put it in writing, keep notes and act promptly.
Write checks only to the brokerage firm.

Actual examples of "sales scripts" used by unscrupulous stockbrokers.

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Do not allow your broker to hold you in a stock when you want to sell.

Many unscrupulous brokerage firms have what is know as a "no net selling" policy. What this means is that if a broker has a customer who wants to sell one of the firm's house stocks, the broker must find a buyer for the stock before he is allowed to execute the sale.

This is an unethical practice which should not be tolerated. If you feel your broker is going to unreasonable lengths to keep you from selling a security you want to sell, put your sell order in writing, and talk to a manager.

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