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Investing / Financial Professionals

Before you invest, it’s important to educate yourself and make smart decisions to protect your money. Be sure you have a full understanding of your basic finances so you know how much money you can comfortably invest. Also, it makes sense to create a list of your financial goals; you are more likely to reach your goals if you set them before you invest or make other significant financial decisions.

While you should be wary of some information that you find online, there are some excellent and reliable resources just a few mouse clicks away. For example, the United States Securities and Exchange Commission (SEC), the federal agency that oversees the securities exchanges, has a website that provides advice on making good investment decisions and avoiding fraud: https://investor.gov/. The Financial Industry Regulatory Authority (FINRA), a non-profit organization created by Congress to protect investors, also provides an investor education website with tips on preparing to invest as well as information on basic finances, such as managing debt and starting an emergency fund: https://finra.org/investors.

Ask Questions Before Hiring an Advisor or Making Investments:

You can invest on your own, or hire an investment professional to help you with your financial goals and investments. It is important to educate yourself in connection with hiring a financial advisor, making investments, and purchasing or selling securities. To invest wisely and avoid fraud, information is your best tool. Ask questions. Evaluate the background of any financial advisor, including checking for licenses and any disciplinary action, before you hand over your hard-earned money. Remember, it is your money at stake and you are paying for the assistance of a financial professional. Don’t feel intimidated: you have every right to ask questions.

Beware of Fraud:

People fall victim to financial fraud all too often, whether they are first time investors or experienced professionals. Learn how to recognize the red flags of common financial frauds, and the persuasion tactics of fraudsters. Be careful with unsolicited phone calls or letters, high-pressure sales tactics, and promises of doubling or tripling your money in a short time. If it sounds too good to be true, it probably is.

If you have been scammed or victimized by an investment advisor, securities broker or dealer, or other type of financial advisor, you can submit a complaint to the SEC here, or to the California Department of Business Oversight (DBO), which regulates a variety of financial service providers, here.

Some Common Investment Scams (often targeting seniors):

  • Investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional associations (affinity fraud). No matter how friendly and trustworthy the person who brings the investment opportunity seems, ask questions and verify everything—especially if it seems too good to be true.
  • “Ponzi” and “Pyramid” schemes where new investor money, instead of returns from legitimate investments, is fraudulently used to make payments to earlier investors to give the illusion that the investment is successful. You may find more information on “Pyramid” schemes here.
  • “Get rich quick” schemes and seminars, including “insider information” or “hot tips.” Common sense says that if the idea was that great, they would not be sharing it with you. Be skeptical and ask questions to educate yourself and make smart decisions.

To Search for a Licensed Investment Advisor:

The DBO licenses and regulates a variety of financial service providers, including broker dealers and investment advisers. To check whether a financial service provider is licensed by the DBO, and for information about various financial products and services, check the DBO’s website at http://www.dbo.ca.gov/ or call 1-866-275-2677.

FINRA has an informative webpage about the different types of investment professionals and how to choose one. You can use FINRA’s BrokerCheck database to research the background and experience of financial brokers, advisers and firms. You also can check if an investment adviser is registered with the SEC.

State & Federal Laws

You can search California laws on the Internet

California Law

View a checklist of significant California consumer laws

CA Dept of Consumer Affairs

Search U.S. laws on the Internet at U.S. Code

U.S. Code

Megan's Law

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