Embezzlement- When someone takes the assets that you entrust to them and use them for an unintended purpose.
Securities Fraud- Could involve providing false information, withholding key information, offering bad advice, and offering or acting on inside information.
Churning- Excessive trading by a broker in a client's account largely to generate commissions.
Phishing- Attempts to get individuals to reveal personal information through fake websites or deceptive emails.
Identity Theft- Someone stealing your personal details in order to access your personal accounts or setup accounts in your name.
Giving Account Access
Be careful who you give access to your account, and when you do provide access know what the individual is allowed to do. The other day I was in DC and I had a conversation with a gentleman who said his wife had taken over 800k from his retirement account. My first thought was about how horrible that was for her to take the money out of his account that way. Then the investment professional kicks in and gets me to thinking, had the wife been provided with some special access to the account. It could be that she fraudulently accessed his retirement account, that there may have been collusion with the firm/individual releasing the funds, that the company did not follow protocols for the transaction or that the man provided his wife with some specific access which allowed the transaction to proceed.
Trading Authorization- When the account owner grants individuals certain privileges on their account.
Limited Trading Authority- The ability to make general inquiries like account balances, place trades, but not receive disbursements.
Full Trading Authority- Same as Limited Trading Authority and the individual can take disbursements.
Power of Attorney- Gives the individual the ability to act on the account on behalf of its owner. This individual can place trades, conduct money movement transactions, make account inquires, and may be able to update additional account details contingent upon rights designated by the agreement designating access.
Multiple Account Owners- Some accounts provide multiple individuals with the same rights to take action on the account. Some examples are trust accounts, and joint accounts.
*Always be sure to carefully review the documents granting authorizations to see what privileges are granted, could also differ by firm.
Knowing Your Broker
It is very important to know about your broker; both the company and individual that you invest with. A lot of people say to stick with people you know, but the person you know could still be a fraud. Countless tales exist of people introducing friends and relatives to someone with an investment idea and then both parties later end up swindled. Just take a look CNBC’s American Greed and you will see numerous tales of fraud being perpetuated. One thing to always consider is that investing involves risk. Anytime someone offers you an extremely high return or guarantees that you won't incur a loss red flags should go up. A great resource for researching firms and investment professionals you deal with is BrokerCheck offered by FINRA, http://brokercheck.finra.org.
Monitor Your Account Activity
If you have any sort of investment account then you are required to receive certain account records on the account. Some types of records include; statements, trade confirmations, tax forms, and account agreements. Make sure to review these documents often. A lot of times people are shocked to see certain activity take place in their accounts, monitoring the activity can insure you are more aware of what goes on. Its a good idea to setup electronic delivery of documents, but only if you actually check the records. By setting up the electronic delivery you stop paper records floating around that others could potentially intercept. According to a study by Bankrate about the frequency with which individuals check bank and credit card records, 45 percent of individuals who check their accounts do so once a week or less; and a whopping 21 percent never check their accounts online.
The firm where you invest at should have some safeguards in place to protect your account, like a customer verification process. Requiring an individual to setup a unique username and passcode helps to lessen the risk of others accessing your account. Many firms are using a two step identification process, which in addition to your username and passcode requires you to enter a unique code that is sent to you. Most likely your firm also has a dedicated set of protocols to help customers in the event that someone wrongfully accesses customers account and conducts unauthorized transactions. Other security measures include session timeouts, account alerts, secure firewalls, and encryption. For information about the safeguards and policies of your broker check their website for their security information or give them a call to inquire.
Steps to Take
*Regularly check account records.
*Limit giving out your social security number (SSN).
*Create a unique username.
*Check for discrepancies with account records.
*Consider getting online statements instead of paper documents.
*Make sure you have some sort of antivirus protection in place.
*Be careful using wifi when accessing financial accounts.
*Check to see if websites are secure before entering financial details. Https is secure, http is not.
*Be careful when clicking links from unknown sources.
*Use social media smartly, consider the amount of information that you offer up when accessing and using various platforms.
*Look for signs of phishing, which is emails looking for personal information. If you receive an email that looks like it is from your broker wanting your personal information you can give them a call or stop by a location.