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Florida Securities Arbitration: Tips for Investors


You work hard to earn an income for most of your life and invest for a secure retirement.    While market gains are attractive, you don’t want to risk losing your principal to an unqualified, much less unscrupulous, financial advisor. Yet, this is a frequent occurrence when the markets finally decline and securities broker misconduct is unmasked.  Examples of such misconduct include a broker recommending unsuitable investments, an over-concentrated portfolio in a particular asset class or sector, or faulty products the broker does not understand, among others.

To help safeguard your investments, it’s important that you do your homework to ensure you are making suitable investments consistent with investment objective and risk tolerance, not hiring an financial advisor with a checkered past,  and not  inadvertently falling for a scam that seems too good to be true.  Here are some tips on how to be more diligent with your investment accounts.

Do a Background Check on the Investment Professional

Before handing over money to a financial advisor whom you know little about, check the advisor’s background. This is something you can do for free on investor.gov or brokercheck.finra.org.

If It Sounds Too Good to Be True, It Is

Note that a financial advisor who promises you high returns with little to no risk is selling you pie in the sky and it may be a scam.  Legitimate investments in publicly traded companies will rarely make you rich, much less in the short term. Stay away from any investment with high returns that is also pitched as no or minimal risk.

Look for an Appropriate Mix of Funds

It’s recommended to diversify your investments into different asset classes (i.e., stocks, bonds, and cash) rather than rely on any single one. It’s also important to spread out your risk across different industry sectors.    Mutual funds are one type of investment that may help you capture a mix of assets classes and industry sectors, but such funds also require study before investing in them.  Look at the management fees charged, who the managers are and their track record, the fund’s performance history, including comparisons to market indices, and asset-class and sector diversification are important considerations before choosing a fund.

Be Cautious of Using Social Media for Investing

Social media is an integral part of how we get information and communicate.  When it comes to investments, however, social media is not regulated and often may contain little more than an unjustified sales pitch without requisite risk disclosures.    Use social media responsibly as an information-gathering “tool,” but don’t become a social media “fool.”

Look Out for Affinity Fraud

Affinity fraud is one that targets particular groups of people, like those of a common religion, culture, nationality, military service, age, or geography, among others. If you are a member of a group where it seems as if everyone is investing in a particular investment, through a particular broker, be sure to research both the broker and the investment product.  Scams and bad investments often occur in affinity groups. 

Do Your Homework

Always do your due diligence when looking at new investment products or a new financial advisor.  It’s common for unqualified or unscrupulous brokers to pitch investors on trends, what’s “hot,” and market-timing.  While financial advisors are regulated, the regulations rarely keep up with misconduct.  Ultimately, your financial advisor’s primary focus is to generate income for taking some action, whether it’s buying or selling.  The exception is a reasonably priced fee-based account, where the brokerage firm generates income from the account assets regardless of activity in the account.

Contact a Securities Arbitration or Litigation Attorney

If you have been the subject of losses in your investments as a result of broker misconduct, unsuitable investments, or investment fraud, you should contact a lawyer skilled in evaluating investor cases.  If this is your situation, please contact the West Palm Beach securities arbitration attorneys at McCabe Rabin, P.A, at 561-659-7878 or 1-877-915-4040 to schedule an initial consultation.


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