Investment Fraud and Recovery Options Are you a Victim of Investment Fraud?

Thousands of people are promised high returns on their investments every day, but in reality, their money is being stolen and utilized elsewhere. Investment fraud is a prominent crime, and it’s important to exercise caution before investing any form of wealth you may have. Here, we’ll dive into the details of investment fraud, and provide you with tips to help you if you think you’ve been defrauded.  

If you’ve invested your money in a fraudulent scheme or with a broker that has ill intentions, it’s imperative to understand your options and know that there are ways you can be supported. Seniors who have fallen victim to securities fraud may have several legal options available to them. Depending on the circumstances, they can file a complaint with the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA). They can also file a lawsuit against the person or company that defrauded them. Additionally, seniors can contact their state’s securities regulator or an attorney that specializes in investment fraud cases.  

Investment fraud or securities fraud is defined as a white-collar crime that can be committed in a vast array of forms. The main aspect of this involves providing investors with misleading information that they use to make decisions. The offenders of the fraud can be an individual, such as a stockbroker. Or, it can be an organization, such as a brokerage firm, corporation, or investment bank. Some examples of securities fraud include Ponzi schemes, pyramid schemes, and late-day trading. Securities fraud can also include false information, pump-and-dump schemes, or trading on insider information. 

How to Recover Losses from Investment Fraud 

If you were defrauded by your broker or financial advisor, you may be able to recover your investment losses through FINRA arbitration. FINRA Arbitration is a formal alternative to litigation in which two or more parties select a neutral arbitrator to resolve a dispute. It is like going to court, but it is usually faster, cheaper and less complex than litigation. 

It is important to note that most broker dealers require you to sign an arbitration agreement when you hire the firm. Therefore, if you have suffered losses from investment fraud due to broker negligence, a FINRA arbitration attorney can help you.

You first must file a claim with FINRA. This claim should include a description of the fraud, the amount of money lost, and any supporting documentation. Once the claim is filed, FINRA will appoint an arbitrator to hear the case.  

The arbitrator is responsible for reviewing the evidence and making a decision about whether the investor is entitled to restitution. If the arbitrator rules in favor of the investor, they will issue an award for damages, and this can be used to seek restitution from the person or company that defrauded the investor.  

Filing a claim through the Securities and Exchange Commission (SEC) is another way you can file a complaint if you feel as though you’ve been swindled or are involved in an investment fraud scam. You can visit their website and navigate to their “Report a Concern” page. The Securities and Exchange Commission announced that it filed 760 total enforcement actions in fiscal year 2022, and recovered a record $6.4 billion in penalties and disgorgement on behalf of investing public.  The Red Flags of Investment Fraud You Should Look Out For 

There are red flags you should be vigilantly looking for when investing. Although these signs are not definite proof that you have been defrauded, they should raise some suspicion and prompt further investigation. Some of those red flags include:  

  1. Promises of high returns with little or no risk  
  2. Pressure to invest quickly  
  3. Unregistered investments or unlicensed sellers  
  4. Complex investment strategies that you don’t understand  
  5. Lack of confirmation or documentation about the investment  

It is important to pay attention to the red flags you may see because they could save you from significant financial losses. By being aware of these, you can protect yourself from potential scams and make more informed decisions about investing.  

 Has your Broker or Financial Advisor ever been Involved in Investment Fraud? 

Always check whether the person offering to sell you an investment is registered and licensed, even if you know him or her personally.  Researching the background of the individuals and firms selling you investments, including their registration/license status and disciplinary history, is easy and free. Just go to FINRA’s BrokerCheck website where you can find the following information about your advisor: 

  • High number of customer complaints  
  • Employment at firms that have been expelled from the securities industry   
  • Employment terminations
    Personal bankruptcy  
  • Federal tax liens or judgments  
  • Repeatedly moving firms  
  • Regulatory Investigations
    Failed industry qualification examinations  
  • Suspensions or fines  

FINRA BrokerCheck is a useful tool to utilize when first meeting with your new broker or financial advisor.  This is quick and easy way to deter you from entering into any investment fraud schemes. 

In Conclusion

In conclusion, investment fraud is a prevalent crime that can result in significant financial losses for unsuspecting victims. It is important for individuals to exercise caution and be aware of the red flags associated with investment fraud. If you have fallen victim to investment fraud, there are options available for recovery. Seniors, in particular, can seek support by filing complaints with regulatory authorities such as the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA), as well as pursuing legal action against the fraudulent parties.

Additionally, victims may consider FINRA arbitration as a means to recover their investment losses. By staying informed, conducting thorough research on brokers and financial advisors, and utilizing tools like FINRA BrokerCheck, individuals can protect themselves from investment fraud and make more informed decisions about their investments.


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