Working with brokers always comes with its risks; you can end up with a legitimate investment, or you might end up getting scammed. According to statistics, investment broker scams are on the rise; this is why it is now more important than ever to check out brokers before you engage in any business. So, how to know if a company is legit or how to tell if a website is legit?
Luckily for you, there are several ways you can check if your broker is legit. Always remember to follow the following steps if you are approached by a broker or happen to connect with one.
Beware of Unsolicited Contracts
If a broker contacts you unsolicited and mentions a company you don’t recall doing business with before, you should most likely consider this a red flag and start doing your research. Scammers might try to convince you to invest in a new business opportunity, usually with a big talk on returns for your investment that might seem too good to be true. As an investor, you should avoid such unsolicited advice.
Look for Reviews or Read Up on Forums Online
The best solution to figuring out if a broker is legit or a scammer is to read up on reviews from their clients. True brokers should have plenty of useful details online and should come up in reviews.
You should also look into online trading forums or Forex forums. These forums have online discussions on brokers and can provide you with details of their services and actual user experience while working with the brokers. Some reviews can be biased, so look for a legitimate review. If you find that a review is simply overdoing it by praising the broker’s services, it might be fake.
Do Your Research
Looking up reviews is one thing, but you should also do a background check on the company the broker represents as well. According to state regulations, broker-dealers must register themselves with the SEC (Securities and Exchange Commission) and be a member of at least one SRO (self-regulatory organization), according to the state in which they conduct business. Registered brokers are always more legitimate, and you are advised to always pursue business with a verified registered broker.
The SEC also enlists registered brokerage firms on their Investment Adviser Public Disclosure website, where you can view their reporting form. Alternatively, you can also search FINRA’s website BrokerCheck for brokers and their employment history, certifications, licenses, or any violations.
Look for Small Errors
The most common tell of an illegitimate broker is small errors and oversights in their documentation and the information they provide. Be sure to request documentation and review that with reports you get from the IAPD or BrokerCheck website. Look out for typos in the text or discrepancies in the two reports. Sometimes documents are forged using slightly different fonts or might be missing information entirely; both are red flags you should look out for.
Ask Plenty of Questions
When you are first looking for a broker to work with, you should look for people who can offer you actual advice and useful services. You need to have an actual one-on-one conversation with the broker.
Be sure to ask as many questions as you can, especially regarding the company’s services, their previous work, and how they can help you with your specific needs. If the broker evades your questions or doesn’t give you clear information, it is a sign they might not be the right person to consult.
Don’t Rush It!
The most important part is to never rush into signing up with a broker. Definitely do not share any money or personal information with the broker until you verify their legitimacy. Instead, take your time with your research, follow each step closely and stay alert for any of the red flags mentioned.
In case you are suspicious that the broker you are working with is a scammer, you should immediately refrain from doing business with them and pull out your funds. You should also file a complaint against the broker with your state regulators.
Final Words
So, now you know how to find out if a broker is legit or not. Your savings are the result of your years of hard work; you must not let them go to waste. Therefore, always take your time, do your research and pay attention to every detail before and after getting into contact with a broker. If you notice anything suspicious or are not satisfied, step back.