Tips for Tracking Your Investment Brokerage Activity

Savage Villoch Law, PLLC
19
Jan

tracking investment brokerage activityMany passive investors are happy just leaving their investments at the hands of their brokerage firms. Many investors opt review brokerage activity via a monthly overview statement rather than from a hands-on approach. Broker-dealers handling investment accounts are free to make most decisions on quantity and frequency of investment securities.

Although ostensibly broker-dealers must have the investor’s interests at heart, some may take advantage of the lack of oversight from the investor.

The Securities and Exchange Commission (SEC) warns that, in some cases, investors have encountered excessive fees due to sharp increases in brokerage activity on investment accounts.

In a recently issued bulletin, the SEC offers some tips for investors receiving monthly statements to better track their investment brokerage activity.

Reviewing Your Investment Brokerage Activity

  • Watch for Red Flags
    • Unauthorized trades – Investors still have executive control over brokerage activity. Make sure to grant prior approval for all deals.
    • Frequent trading – Be wary of frequent trades and sales that don’t fit with your investment plan.
    • Excessive fees – Don’t be afraid to inquire about any irregular or excessive fees you receive on your statement. It is important to know
  • Be Aware of Illegal Brokerage Activity
    • Churning – Churning is a term given to excessive broker-dealer trading. This occurs in order for broker-dealers to earn higher commissions. It is important to know that even excessive brokerage activity resulting in higher returns can still be considered churning.

Stopping Excessive Brokerage Activity

  • Discuss Investment Goals – Discuss your investment goals with your broker-dealer. Make them aware of your expectations and needs.
  • Discuss Activity with Brokerage Firm – If you are notified of excessive activity by your brokerage firm, discuss the investment plan that you made with your broker-dealer. Make sure you know if your broker’s actions are not in compliance with regulations.

Investor Resources