Avoiding Investor Fraud

Staff Writer
Columbus CEO

If you think investment scammers target only aging people with dementia, think again. C-suite executives are high on the fraud hit list.

"They're the top victims," says John Gannon, senior vice president for investor education at the Financial Industry Regulatory Authority (FINRA). "It's not the widow home alone getting a phone call from a questionable character. The prime candidates are male, college-educated with a sizable income and who are financially literate.

"Their weakness is that they're overly optimistic and self-directed, meaning they don't always rely on financial professionals for a second opinion. They act primarily on their own knowledge, and that can get them in trouble," Gannon says.

FINRA reports that only 15 percent of investors do background checks on their financial professionals, though information is readily available.

Federal and state securities laws require stockbrokers, registered investment advisors (RIAs) and their firms to be licensed or registered. Key information, such as licensing and registration status, consumer complaints and disciplinary actions, is available to the public.

The U.S. Securities and Exchange Commission maintains a database of more than 10,000 registered investment advisory firms, but not one for individual RIAs. The Ohio Department of Commerce's Securities Division offers consumer information on state-regulated RIAs and their firms.

FINRA's online BrokerCheck feature allows investors to research both current and former member brokerage houses and individual investment professionals.

The Ohio Department of Insurance offers consumer protection information regarding annuity sales.

Consumers also can search for Securities Investor Protection Corp. (SIPC) membership status through SIPC's online database. SIPC provides limited investor protection if a brokerage firm becomes insolvent.