More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
Step aside, Internet schemers, the newest imposters on the block are phony phone callers from fake brokerage firms.
The Financial Industry Regulatory Authority in its most recent investor alert warns that old-fashioned cold calls by brokerage firm imposters have caught on as the latest phishing trend.
“Recently, FINRA has received reports that scamsters are posing as employees of at least one well-known brokerage firm to obtain personal information,” FINRA reported. “In a new twist to Internet phishing schemes, which use spam email to lure you into revealing everything from Social Security numbers to financial account information, it appears that some fraudsters may be resorting to a time-tested method — the telephone call.”
Fraudsters using the scam start by cold-calling potential victims and posing as associates of a well-known brokerage firm. In some cases, people who have received these calls are actually customers of the legitimate brokerage firm, FINRA warns.
The fraudsters claim to offer information about certificates of deposit, citing yields well above the best market rates, according to the FINRA alert. “The imposters say their supervisor will follow up with more details about the CDs, and sometimes send potential victims applications and forms to transfer funds in an effort to collect additional information. Armed with this information, the fraudsters may attempt to steal the person's identity or money from an account.”
Investors should never give personal information or authorize a transfer of funds to an unknown person who phones. To determine whether the caller is legitimate, FINRA advises investors to take these steps:
Call the customer service center or compliance office of the firm the caller claims to work for. Use the number on the firm's website or in a publicly available telephone directory. Verify the caller's identity and the legitimacy of the recommended investment.
If you have an account at the firm, check caller ID (if you have it) for the firm's name and telephone number. Be wary of “unavailable” or unfamiliar phone numbers. Keep in mind that sophisticated fraudsters can deliberately falsify a phone number for caller ID purposes (known as “caller ID spoofing”), which makes it all the more important to call the firm directly.
If you believe you're a victim of a scam, act quickly. Contact your financial institution immediately to report a loss or theft of funds through an electronic funds transfer. If you believe your identity has been stolen, follow the Federal Trade Commission's Identity Theft action plan. FINRA also encourages investors to file a complaint using the online Complaint Center or send a tip to FINRA's Office of the Whistleblower.
Read SEC, FINRA Warn of Email ‘Pump-and-Dump’ Stock Schemes at ThinkAdvisor.