Types of Misconduct
Before investing, take some time to familiarize yourself with the different types of misconduct. If you suspect a company or individual has done something wrong, file a complaint immediately
Frequently, a person who promotes an illegal distribution is not registered in the securities industry. The sellers often misrepresent the investment they are selling to investors. For this reason, it is important to do a background and registration check prior to giving anyone your money.
Companies that trade on stock exchanges have many disclosure obligations to ensure their securities trade fairly and transparently. In addition, advisors and firms must register with securities regulators, and meet a variety of obligations.
Still, fraud and misconduct can and does happen within the regulated system. Examples of stock market misconduct are illegal insider trading, market manipulation, and falsifying financial statements.
Choosing an individual working for a bank or a registered firm to handle your investments should ensure that you are dealing with a legitimate company that has assets and insurance in case anything goes wrong.
Nevertheless, there are rare cases where an investment advisor intentionally mismanages or even steals clients’ money. To protect your investments, you should communicate regularly with your advisor and ask questions if you have concerns. For more information on financial advisors, visit our Work With an Advisor section.
Illegal and Unethical Advisor Conduct
Even though you depend on your financial advisor to help you make investment decisions, it is essential that you monitor your portfolio and keep an eye on their work. If you suspect that anything is wrong, ask questions. If the advisor does not give satisfactory answers, or you still have doubts, contact the firm or a securities regulator.
Know the Warning Signs
- Offers of lucrative private deals:Registered advisors should not be selling or recommending ‘off-book’ or ‘secret’ deals to clients.
- High-pressure sales:If an advisor pressures you into buying an investment, or bullies you into an uncomfortable investment strategy, there may be something wrong.
- Request for direct payment:When you write a cheque for investment purposes, always make it out to the firm that holds your account, not the advisor or a company he or she owns.
- Errors on your statements:If you see questionable investments, or you think there is money missing from your account, and your advisor can’t explain or fix it, you need to speak with their employer immediately.
- Your statements don't look right:When there is a discrepancy, or something doesn’t look right, check into it right away.
Taking Action Against Advisor Misconduct
- Draw up a list of questions:An advisor who is doing something wrong may make excuses or offer to make things right. This list will help you stick to key issues.
- Make sure you document the answers:Email is an effective form of communication, as it creates a record of the conversation. When you cannot use email take notes or record the conversation.
- Speak to the investment firm or make a complaint:Once you get the answers to your questions, talk to your investment firm, and possibly, a securities regulator.