Investment Fraud? How is is Discovered?

When it comes to investment fraud or stockbroker fraud, it is rare that a stockbroker, financial advisor, or firm will confess to making unsuitable recommendations, illegally recommending private investments away from the firm, churning an account, improperly switching annuities to generate commissions, improperly pushing variable annuities, or trading a client account without proper authority.

In many instances it is up to a client to discover the fraud or impropriety, and that is unlike most trusted professional relationships. Most of us implicitly and completely trust our doctor, lawyer, accountant, or other professional to set aside their personal bias or self-interest and provide the best advice and recommendations to the individual patient or client. While asking some routine common-sense questions may not seem out of line, most individuals, no matter how knowledgeable or experienced they may be in their own profession, are simply lacking in sufficient knowledge or experience to even know what questions they should be asking in the first place. They may be in no position to challenge or follow-up on whatever the response.

For many, it is not even the client that notices something is not looking right or appropriate. It is often a third party. A CPA may notice realized or unrealized losses, a potential concentration issue, or an oddly named investment. An estate planning lawyer or probate lawyer may notice something is amiss, or a cynical friend who doesn?t share the same level of trust in the financial advisor or the firm may recognize a potential pattern of misconduct.

In most cases, the client had an inkling, suspicion, or a gut feeling and either chose not to question or challenge the professional advisor, or was satisfied with a superficial response, noting that the market was down, everyone lost money in that investment, or a vague promise that the investment or market will come back. Many potential claims will go by silently unnoticed by unsuspecting investors.

If more investors, CPAs, and attorneys were aware of the ways that investor clients are often victimized, and how FINRA has established an arbitration forum and system that can enable investors with a process to confidentially, inexpensively and efficiently recover their losses, the playing field might even out.

Just like any profession, the overwhelming majority of professionals in the financial services industry provide enormous resources, services and expertise for their clientele. Unfortunately, just as it is in any profession, there are a small percentage that due to negligence or impropriety have abused the trust and confidence that the investor placed in them from the outset.

Of course investors should remain vigilant, ask questions, and demand answers, but it is often what they don?t even know, or don?t even know to ask that leaves them exposed in these situations. Investors should look out for the following potential warning signs:

  • If they understand what they are invested in or why they hold the investments
  • If they lose more money than they thought they should
  • If they had inadequate disclosures regarding the potential risks, or how much they might lose
  • If their trusted professional avoids questions, or gives excuses instead of answers
  • If calls or emails are not being returned promptly
  • If vague assurances are all that is being provided such as ?don?t worry? or the market ?always comes back?



  • If trades were entered without your permission first
  • If you are only told about investments you made after the fact
  • If you are asked to just ?sign here? or sign and return a form document without a detailed explanation as to what you are signing and why it is needed
  • Trust your gut and your instincts and get a second opinion


If you have questions or concerns regarding losses or the overall handling of your investment portfolio or your individual investments, please call the Investment Loss Recovery Group at 1-800-856-3352. They will help you schedule a no-cost consultation and review.

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