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Thursday, March 11, 2010

Investing Checklist from DFI’s Chief of Enforcement, Suzanne Sarason

Suzanne Sarason was on KIRO radio this afternoon giving listeners tips on how to avoid investment fraud, now she’s sharing them with you.

1) Before Selecting a Financial Advisor
  • Determine what services you are looking for (advice, trades, advice and trades)
    • A securities salesperson can place trades for you through a broker-dealer
    • An investment adviser representative gives advice on behalf of an investment adviser
    • An investment adviser provides advice on securities
  • Interview the potential financial advisor
    • Ask about training and experience
    • Ask about investment philosophy and track record
    • Ask how the relationship will work (who will you speak with, how often)
    • Ask what products or services are offered
    • Ask how much you will be charged
  • Check the potential financial advisor’s license status and history
    • Check the license status and history by searching FINRA’s BrokerCheck.
    • Call the Securities Division of the Washington Department of Financial Institutions to find out if there any complaints against the advisor. 1-877-RING DFI (746-4334).
2) Before Opening an Account
  • Read the agreement—who is the agreement with?
    • Introducing broker
    • Clearing broker
  • What investment objectives are checked on your new account form?
    • Do they match what you want?
  • Checks should go to a third party custodian (usually a broker-dealer)
3) Monitoring Your Account
  • Take notes on conversations with your broker
  • Check your account statements monthly
  • If you see something you did not expect, call your broker
    • If there is still a problem after calling your broker, call your broker’s supervisor (this is sometimes the branch manager)
    • If calling the supervisor does not work, file a complaint the Securities Division of the Washington Department of Financial Institutions
4) Evaluating Your Broker’s Recommendations
  • Ask why the broker thinks the product would be good for you
  • If the recommendation is to trade one product for another, find out how much it costs to make the exchange
  • If you can’t understand how a product works, don’t buy it
  • Don’t forget that it is your money. No one has your interests at heart in the same way you do.