Is Your Broker Selling Unapproved Investments?

Brokers May Operate Side Business Selling Investments and Other Products

But not every broker is so conservative. Some brokers actually engage in a side business selling investments or other financial products that may or may not have been approved by their employers. These products can range from insurance to shares in a hedge fund or startup company. 

Approved and Unapproved Broker Outside Business Activities

According to SEC and FINRA rules and regulations, financial advisors are required to declare any selling away or outside business activities to their broker-dealers. BDs can then approve or reject those activities. Unfortunately, not every broker is conscientious or honest. Many of them fail to notify their broker-dealers of what they are doing outside of normal business activities - or they deliberate omit these activities because they are dubious or even criminal.

Recently the SEC's Retail Strategy Task Force and Office of Investor Education and Advocacy released a list of Red Flags when it comes to figuring out whether your broker may be offering unapproved investments for sale on the side. 

Common Signs Your Broker May Be Selling Unapproved Investments

  • Your broker asks you to make out a check, or to wire money, to any person or to a different firm;

  • Your broker tries to sell you an investment without any paperwork about the investment;
  • Investments or deposits you made through your broker do not appear on your account statement from the firm; or
  • You receive an account statement that does not appear to be from the firm.

Investors who encounter any of these issues should probe their broker for an explanation and follow up with the firm’s compliance department.

Pennsylvania & New Jersey Securities Litigation Law Firm

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If you or someone you know has been the victim of broker misconduct or investment fraud, please contact our attorneys immediately for a free consultation toll-free at 215 462 3330 or by using our online contact form.