How can I spot an imposter broker?

| Feb 12, 2021 | Investment Fraud

Not every investor you talk to is legitimate. Some people have lost a lot of money because they handed money or personal information over to a person or company that turned out to be a scammer. As The Motley Fool explains, scammers have impersonated reputable brokers, with some even passing themselves off as FINRA executives. 

Fortunately, you have ways to verify a fraudster’s identity. In the process, you may discover other signs that could tip you off to someone who does not have your best interests at heart. 

Consult authoritative sources

There are a number of sources you can use to check an investor’s identity before agreeing to anything. FINRA offers the BrokerCheck service and the SEC provides a report through the Investment Adviser Public Disclosure. You may also check the state registration database. Between all of these sources, you may find out that your contact is not who they appear to be. 

You can reinforce your background check by verifying the information online. Enter the name of the individual or firm that contacted you in a search engine. The results might not match the information you received.  You can also check the legitimacy of information like a phone number or an address supplied by your contact. See if it matches what you find on BrokerCheck or other sources. 

Check for document errors

Many scammers leave telltale signs in their documents. You might see obvious problems like typos or misspelled names. Keep an eye out for differences in fonts. A section with a different font indicates that someone could have copied and pasted it from another document, or that someone had copied the rest of the document from a different source. 

Watch for other red flags

A scammer will reinforce their suspicious nature by acting in ways an honest investor would not. Ethical brokers do not promise guaranteed or high returns or push their clients into making rash investment decisions. Fraudsters also tend to explain their strategies in complex terms that make it hard to understand. Spotting some of these red flags may save you from losing money on a bad investment.