Bad Actors: Tips for Spotting the Financial Industry’s Bad Apples

We’ve all seen bad actors in movies and T.V., but did you know that bad actors can be found on Wall Street and other financial industry institutions? The Financial Industry Regulatory Authority (FINRA) recently released a statement outlining the need for checks-and-balances against bad actors.

What are bad actors?

FINRA defines a bad actor as one within the financial industry “who seeks to evade regulatory requirements and harm investors for their own personal gain”. Essentially, they’re con artists; fraudsters. I’m sure you’re familiar with that old adage about a few bad apples, right? Well, that’s exactly what Financial industry regulators have to say about bad actors. In his statement, FINRA President & CEO, Robert Cook spoke about the danger that bad actors pose to the overall stability in the industry as a whole. Bad actors have the capacity to ruin investor confidence in their broker-dealer and mar the reputation of the entire industry through their actions.

Spotting the bad apples

If you’re involved in the financial industry as an investor, it’s important to be able to spot bad actors. FINRA has comprehensive preventative measures in place to seed-out bad apples but every once in a while, some are bound to slip through the cracks. Here’s some things you should know before doing any business with a new broker-dealer.

License & Registration

No matter what security you’re investing in, make sure your broker-dealer is properly licensed and registered. This means they must be not only a licensed broker, but licensed to do the specific function they are offering to you. The broker must also registered with a licensed brokerage firm.

Account Monitoring

It is especially import to review your monthly account statements. Even if you are a passive investor who prefers to let your broker-dealer make investments as they see fit, you need to monitor your account activity and statements. Watch out for any unusual investments involving large sums, or irregular movement and contact your broker-dealer if you see anything unusual.

Aggressive Solicitation Practices

Aggressive or unwarranted solicitation of services or information should be an immediate red-flag. If you have been receiving repeated calls, emails or requests for correspondence from an individual claiming to be a broker-dealer associated with your account, you need to verify they’re identity.

Investor Resources

FINRA offers comprehensive investor support and resources. Click here if you want to learn more about filing a complaint or other services Contact our investment loss recovery attorneys if you believe you or a family member has been affected by bad actors.