Many financial scams involve unlicensed individuals selling unregistered investments—ranging from stocks, bonds, and oil or gas deals to fictitious instruments, such as prime bank investments. That's why it is particularly important to "Ask and Check" about investments and investment professionals before you invest. Regardless of your trust or ties, or prior dealings with the professional, do your homework.
Check Out the Seller
If a salesperson is trying to sell you an investment, check them out by following these steps.
Step 1: Ask "Are you licensed to sell me this investment?"
Legitimate investment professionals—including registered financial professionals (also known as registered representatives), investment advisers and insurance agents—must be licensed with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or your state securities or insurance regulator before they can sell you anything. If they say they aren't licensed, say good bye—and don't buy.
Step 2: Check.
If they say they are licensed, check them out as follows:
If They Say They Are a ...
Look Here
Helpful Hints
Registered Financial Professional
Visit FINRA BrokerCheck or call FINRA at (800) 289-9999.
Also contact your state securities regulator.
Check SEC Action Lookup tool for formal actions that the SEC has brought against individuals.
If you find the individual on BrokerCheck, click the "More Details" button below their name to view their summary report. The summary report provides information on the individual's employment history, qualifications, disclosure events and more. You can also download a detailed report on the individual.
To interpret what you find, see FINRA BrokerCheck Tips below.
Use both FINRA BrokerCheck and contact your state. There's helpful information in both places.
Investment Adviser
Visit FINRA BrokerCheck or call FINRA at (800) 289-9999.
Check SEC Action Lookup tool for formal actions that the SEC has brought against individuals.
If you find the individual on BrokerCheck, click the "More Details" button below their name to view their summary report. The summary report provides information on the individual's employment history, qualifications, disclosure events and more. You can also download a detailed report on the individual.
To interpret what you find, see FINRA BrokerCheck Tips below.
If you find the firm on IAPD, click on its name to view its Form ADV (the investment adviser registration form).
For disciplinary information about the firm, scroll to the bottom of the page, and click "Item 11—Disclosure."
If you find the individual on IAPD, click their name and click this button in the upper right side of the screen: This will give you information on the individual’s employment history, qualifications, disclosure events and more.
Requirements and information available vary by state.
Be aware that "captive" agents can sell only the policies and products their company offers. Independent insurance agents typically represent multiple companies.
Find out more about BrokerCheck and get tips on searching for individual or firms.
Check Out the Investment: Is It Registered with the SEC?
Take these steps to check whether a recommended investment is registered with the Securities and Exchange Commission (SEC):
Step 1: Ask the person offering the investment, "Is this investment registered with the SEC?"
If the answer is no, ask why the investment is not registered. Not all securities offerings must be registered with the SEC—such as those issued by municipal, state and federal governments. The SEC also provides exemptions for certain intrastate offerings and small public and private offerings under a rule known as Regulation D. For more information, read the SEC's Microcap Stock: A Guide for Investors.
Step 2: If yes, then use the chart below to help you check that this is in fact the case.
Call the SEC's Office of Investor Education and Advocacy toll-free at (800) SEC-0330 if you have trouble using EDGAR or have questions about a company or investment.
Free public access to corporate information, including registration statements, prospectuses, annual reports with audited financial statements on Form 10-K and quarterly reports on Form 10-Q.
Information about recent corporate events reported on Form 8-K.
Confirmation of whether a company is using an exemption under Regulation D.
Information about the investment beyond registration status, such as whether a promotion appears in violation of state securities law.
Ask if your state regulator is aware of any problems associated with the company or the type of investment.
You can also contact the North American Securities Administrators Association at (202) 737-0900.
Keep in mind that registration with the SEC does not guarantee that an investment will be a good one or immune to fraud. Likewise, lack of registration does not mean the investment lacks legitimacy. The critical difference is the extreme level of risk you assume when you invest in a company about which little or no information is publicly available. SEC registration carries a number of advantages for investors, including disclosure of financial and other information that can help investors assess whether to invest in a company's securities.
To check out the registration of the following types of investments, follow these steps:
Mutual Funds
Visit the SEC's EDGAR Mutual Fund Search. If you find the mutual fund there, then it is registered with the SEC.
Visit FINRA Market Data. Click on the link that says Company Information in the far left column to search for your investment. If you find the ETF, ETN or closed-end fund on Market Data, it is registered with the SEC.
As a financial expert well-versed in investment fraud prevention and regulations, I have comprehensive knowledge of the mechanisms behind financial scams, unregistered investments, and the necessary due diligence to safeguard against fraudulent activities in the investment landscape. I've advised individuals and organizations on best practices for verifying investment professionals and scrutinizing investment opportunities to mitigate risks associated with unlicensed and deceptive dealings.
The article highlights the critical steps investors should take to safeguard themselves against potential scams and unregistered investments:
Verify the Legitimacy of the Seller:
Check if the salesperson is licensed to sell the investment.
For registered financial professionals, use FINRA BrokerCheck or contact state securities regulators.
For investment advisers, use FINRA BrokerCheck, SEC's Investment Adviser Public Disclosure (IAPD) website, and state securities regulators.
For insurance agents, contact the state's insurance commission or visit the National Association of Insurance Commissioners.
Check Investment Registration with the SEC:
Inquire whether the investment is registered with the Securities and Exchange Commission (SEC).
Use SEC's EDGAR Company Search for corporate information and registration status.
Contact your state securities regulator for additional information beyond registration status.
Verify specific investments like Mutual Funds, Variable Annuities, Variable Insurance Products, ETFs, ETNs, and Closed-end Funds through SEC resources (EDGAR Mutual Fund Search, EDGAR Variable Insurance Product Search, FINRA Market Data).
The article emphasizes the importance of investor due diligence, including checking licenses, registration status, and researching investment opportunities through official channels like FINRA, SEC, and state regulatory bodies. It underscores that registration does not guarantee investment success or fraud immunity but provides critical information for informed decision-making.
Understanding these concepts involves familiarity with regulatory bodies such as FINRA, the SEC, and state securities regulators, as well as the tools available (e.g., FINRA BrokerCheck, SEC's EDGAR) for investigating investment professionals and securities.
This knowledge aids in comprehending the significance of licensing, registration, and the necessity for thorough research before engaging in any investment, thereby mitigating the risks associated with fraudulent schemes and unregistered investments.
A BrokerCheck report for an individual who meets any of these criteria will typically include the same information categories as outlined above for individuals registered within the last 10 years. BrokerCheck may have limited information for individuals whose last registration ended before August 1999.
The theory is that if the PE ratio plus inflation is less than 21, then the market still represents value, whereas if this value exceeds 21, the market is becoming expensive.
Visit FINRA BrokerCheck or call FINRA at (800) 289-9999. Or, visit the SEC's Investment Adviser Public Disclosure (IAPD) website. Also, contact your state securities regulator. Check SEC Action Lookup tool for formal actions that the SEC has brought against individuals.
We are authorized by Congress to protect America's investors by making sure the securities industry operates fairly and honestly. Want to learn more? Need Assistance? Call BrokerCheck Help Line at (800) 289-9999, email us, or complete our survey.
If your registration remains CE inactive for two years, it will be administratively terminated (CE Two Year Termed), and you will be required to re-qualify for your registration by examination. If you are currently registered with a firm and are unsure of your CE requirements, you should contact your firm.
FINRA background check disqualifiers include all felony convictions and certain fraudulent misdemeanor convictions within 10 years. Other disqualifications include injunctions from investment or securities activities and expulsions from financial trade organizations.
Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries. Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.
7% Rule: This is a more conservative version of the 5% rule. It suggests keeping the total risk exposure across all trades at 7% or lower, providing an additional buffer for risk management.
The Rule of 69 is a simple calculation to estimate the time needed for an investment to double if you know the interest rate and if the interest is compounded. For example, if a real estate investor earns twenty percent on an investment, they divide 69 by the 20 percent return and add 0.35 to the result.
You can move money from your checking or savings account or another brokerage account. You own the money and investments in your brokerage account and can sell investments anytime. The broker holds your account and acts as a middleman between you and the investments you want to buy.
State securities regulators should be the first call for an investor before you turn over any money to a broker or investment adviser. You can access extensive employment, disciplinary, and registration information about your stockbroker or investment adviser through your state securities regulator.
Finra, the brokerage industry's self-regulatory organization, is facing a lawsuit arguing that its in-house enforcement and arbitration system is unconstitutional.
The individual is not included in BrokerCheck or the Securities and Exchange Commission's (SEC's) Investment Adviser Public Disclosure database because they: are not currently registered with FINRA, a national securities exchange or a state securities regulator, or.
Consistent with rules, policies and procedures approved by the SEC, FINRA will disclose data on individuals, through BrokerCheck, for ten years after the termination of the individual's FINRA registration and, in certain cases, indefinitely.
Applicants must report their employment history for the past five years on Form U4. Employment verification reveals the following information about each past employer: Name and address. Employment dates.
These rules allow a claim to be filed within 6 years of the occurrence or event giving rise to the cause of action. However, time restrictions, called "statutes of limitations," may be shorter than 6 years.
Introduction: My name is Aron Pacocha, I am a happy, tasty, innocent, proud, talented, courageous, magnificent person who loves writing and wants to share my knowledge and understanding with you.
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