Recently, the Financial Industry Regulatory Authority (FINRA) imposed a fine of $850,000 on a firm with thousands of employees for failing to detect for two years that a single broker had taken more than $370,000 from five customer brokerage accounts. After the firm discovered the misconduct, it paid restitution, plus interest and related fees, to the customers.
Verify the activity in your
account. See if there are
any cash transfers that you
didn't authorize, and if so
immediately contact your
While regulators and firm compliance departments are on the lookout to protect investors from theft and other misconduct in their accounts, investors also can play in role in stopping these activities in their tracks.
Back in 2008, as the financial crisis was unfolding, FINRA issued an alert titled Bearing Up in A Bear Market:You Still Need to Open Your Account Statements. No matter how the market is performing, or how comfortable you are with your firm and broker, reviewing your brokerage account statement is imperative. Looking out for suspicious transactions is just one reason investors should always open and review their account statements.
Reading account statements and trade confirmations sent by your financial firm will give you valuable information about your account balances and trading activity. Follow these tips when you receive your next account statement:
Verify the activity in your account.Check to see if there are any trades or cash transfers that you didn't authorize and, if so, immediately contact your brokerage firm. In the recent Ameriprise case, the employee involved converted the funds from customer accounts through a two-step process. First, he submitted request forms to transfer funds from the customers’ Ameriprise brokerage accounts into the business bank account of the office in which he worked, allegedly for the intended purpose of making investments. He then took funds from that account in order to pay himself additional salary, commissions he had not earned and other money to which he was not entitled.
Confirm basic account information. Verify your address and any other personal information on the account statement. If you have moved, be sure any address change is accurately reflected on your statement. Wrong or outdated address information could hamper delivery of account information. Also check that your account number matches previous statements. You should also confirm the name and contact information for your financial professional (it’s a good idea to try that phone number from time to time). Red flags include a financial professional’s name that is unfamiliar to you, or if a contact number is out of service or always busy or not answered. Be aware that statements from online brokerages or other investment firms that do not provide investment advice generally will not include the name of a specific financial professional, but are required to provide a phone number to call for information about your account.
Compare trades reported on your account statement with your trade confirmations. Trade confirmations contain key trade details. These include the date and time of the transaction, the price at which you bought or sold a security, whether you paid a commission or other transaction fee, and the quantity of shares bought or sold. When a single keystroke can make the difference between 100 and 1,000 shares, it is important to review this information carefully—and as soon as you receive a confirmation. As you compare, see if the size and price of all purchases and sales are correct. Also verify that anticipated dividend and interest payments are reflected. Your statement will tell you so, if that is the case.
Review charges or fees. Fees associated with your account are required to be disclosed on your statement. If you see any charges you don’t understand, don’t be shy: contact our broker or the firm for an explanation. Since fees impact the overall performance of a given investment, it’s important to know what you are paying, and your account statement is a key source of that information.
Don't Snooze and Lose. Certain issues, such as incorrect electronic fund transfers, must be identified to your broker or banker within 60 days after they occur or you could waive your right to a correction. Still others may result in actions by your firm you don't want and—if you don't act promptly—take time, effort, and cost to undo. Immediately question any transaction or entry that you do not understand or did not authorize. If you think it's a minor mistake, talk to your broker. This may be the fastest way to resolve the problem. If you can't resolve the problem with your broker, or you think your broker engaged in unauthorized transactions or other serious misconduct, report it to the firm's management or compliance department in writing. If you and your firm still can't resolve the problem, contact FINRA. You can file a complaint using our online complaint form. If you are seeking to recover money, you may want to consider arbitration or mediation.
To receive the latest Investor Alerts and other important investor information sign up for Investor News.