By Scott Evans, Spring 2014 Student Intern
Investors should be on the lookout for some red flags when examining their account statements. If found, they should ask their investment professional for an explanation as they might indicate that fraudulent activity is occurring.
Included among these red flags are the following:
- Statement periods are not set out at even intervals.
- Account information doesn’t match previous statements for no apparent reason.
- Contact information for the broker or firm is incorrect. A similar red flag is if the phone number provided is disconnected.
- Unauthorized, unexpected, or excessive account activity. For example, be wary of churning.
- Excessive or unexpected fees charged to the account.
- Portfolio breakdown does not match expectations.
Once again, investors should seek an explanation clarifying any suspicious activity apparent from the account statement by reaching out to their investment professional, and this should be done as soon as a red flag is noticed. Perhaps an honest mistake or typo occurred which the investment professional can clear up. In the event that the professional cannot provide an adequate explanation or the investor suspects the adviser is acting improperly, the investor should first seek clarification from his investment professional’s firm. Most large brokerage firms will have a branch manager that supervises individual brokers and a compliance department designed for such oversight. In the event that this does not rectify the situation, an investor should consider consulting an attorney as soon as possible. For investors that qualify, the Investor Advocacy Clinic may be able to help out. More information is available here.
Account statements are vital to investors as they provide an overview of the account’s progress while also detailing recent activity. Importantly, they provide a means for investors to ensure their goals are being met, that they understand their investments, and no fraudulent activity is occurring in the account. Because of this, it is of paramount importance that investors keep themselves informed about the status of their investments by reading every account statement sent to them.