The first line of defense that investors have against fraud is education. Learning more about securities and the laws regulating their sale allows investors to safeguard their transactions and investments and to report possible violations of the Securities Act.
The primary goal of the Securities Division of the Office of the Attorney General is to protect investors from fraud and misrepresentation and ensure as fair a marketplace as possible for the trading of securities in our state. Before you send money to anyone, you should investigate the company making the recommendation, the salesperson, and the investment opportunity by asking questions and checking references. Begin by contacting the appropriate regulatory agencies, such as the Securities Division, the SEC, or FINRA.
The Securities Division has a wealth of information to help investors make informed decisions in choosing reputable brokers and advisers. The Division maintains or has access to databases of individuals and firms and can quickly tell you their status. The staff of the Securities Division is also available to provide information by telephone (803-734-9916).
Top 10 Questions to Ask Before Choosing a Broker
1. Are you registered with the Financial Industry Regulatory Authority (FINRA) and the State of South Carolina? (If they say they are not required to be registered, ask why, then verify this with the Securities Division.)
2. What is your Central Registration Depository (CRD) number? I want to check your disciplinary and work history with my state regulators.
3. Where are you located? Does your firm have any offices in South Carolina?
4. How long have you been in the investment or brokerage industry? (You can verify this by calling the Securities Division.)
5. Is your firm a publicly held corporation with an exchange-listed stock? What symbol? (Most legitimate brokerage firms are listed on major exchanges.)
6. Would you send me some written information about yourself, your firm and the investments you are trying to sell me? (Beware of handwritten material or “flashy” brochures.)
7. Are the investments you are trying to sell me registered in the State of South Carolina? (If the salesperson says they are exempt or not required to be registered, ask which specific exemption was granted, then tell them you want to check this with your state regulators.)
8. Can you guarantee a certain amount or percentage return on my investment? (If the salesperson says “Yes”, beware. There is no such thing as a guaranteed investment.)
9. How many clients do you have in South Carolina/ my community?
10. Can you give me references in my community who are clients of yours?