Avoiding Securities Fraud: The Do's And Don'ts Of Dealing With Stock Brokers

Dealing with brokers can be a good experience – or a bad one. No matter how well you know, or trust, your broker – it doesn't insulate you from broker misconduct. However, knowing what to look for in a broker, and an investment, can mean making profits and avoiding litigation. To maximize the former and avoid the latter, securities fraud lawyers say that consumers can follow some generic Do's and Don'ts:

Do:

• Educate yourself. Consumers absolutely need to understand what product they're in and what the fees and expenses are that are going into that product. For instance, you might be getting an 8% or 9% return, but if you're in a product that's costing you 3%, you're only earning 5% or 6% and so you really aren't earning that. You've got to ask questions, understand what you're getting into and hold your broker accountable.
• Get a second opinion. You can also always go and visit with a competitor, go to another broker at another firm and have them give you an opinion. However, beware of getting trapped into buying into whatever hot product they're pushing!
• Contact a state agency. Insurance and securities agencies are regulated by state boards. While each state differs on how aggressively they'll investigate a claim, this is another route to keep in mind.

Don't:

• Accept advice blindly.Consumers should not accept any recommendations carte blanche. Take time to discuss matters with other family members, other brokers, a securities attorney or an accountant.
• Think you'll get something for nothing. If you are told that you are going to get the highest return, then you need to understand that you're taking the highest risk. Nothing comes free, even in the stock market.
• Put all your eggs into one basket. It's generally not a good idea to be 100% invested in the stock market – as the current economy shows. Every person, especially those who are retiring, needs to have well-balanced portfolio and that means a mix of bonds and stocks, as well.