Expert Advice When You Need It Most

Interested in an investment you learned about from a "cold call?" Look before you leap.

Written by: Robert Kevin Savage

Reputation Level 10

Business Financial Markets

Posted almost 3 years ago. 1 helpful vote, 0 comments

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Check out the broker and his brokerage firm.

You can look up any securities broker by going to the FINRA website at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/index.htm. Or you can call the FINRA Public Disclosure Hotline toll free at (800) 289-9999 with broker's full name, his company and any other information you have such as broker's address. You can also try googling the broker - you may be surprised what you find.

Check out the offered investment.

Google is a good place to start. Check out all stories about the company, including the negative stories that may reveal a scam. Be skeptical of the information you read and see what you can do to verify the veracity of the websites. Insist that the broker send you written information about the proposed investment and then read it to make sure the written disclosures are the same as the disclosures made by the broker.

If you do decide to invest:

Make sure that you (not the broker) accurately completes the 'new account form.' Pay particular attention to the income and asset sections as well as the risk tolerance and investment objectives disclosure. If you just sign a blank document as many brokers will suggest, you can make a pretty safe bet that the information that is ultimately placed on the new account form will not accurately reflect your situation. Make sure that the broker fully understands your financial situation, risk tolerance, etc. because a broker has a duty to recommend only suitable investments. So, in fact, the broker is required to find out about your financial situation and investment objectives BEFORE he or she recommends any investment to you.

If you invest and then have a problem:

Call the brokerage firm immediately and ask to speak with a supervisor. Make notes of the conversation, including date and time of the call. Follow up with a letter stating your case - preferably by certified mail and/or fax so you have a receipt of delivery. Then keep up the pressure. Do not simply rely on the broker and/or brokerage firm assuring you things will be taken care of. Insist upon written verification of what they are going to do and make sure they do it.