As part of the international effort, FINRA and the FINRA Foundation, the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the North American Securities Administrators Association (NASAA) issued a joint investor bulletin. The bulletin offers consumers tips to make smarter decisions about their investments, including checking the background of their financial professional and conducting due diligence on any investment offers.
“FINRA and the FINRA Foundation work to ensure investor protection through collaboration with federal and state regulatory partners and through research and education,” said Gerri Walsh, FINRA’s Senior Vice President of Investor Protection and President of the FINRA Foundation. “Throughout the week, we will publish key investor tips, conduct outreach with investor audiences, and collaborate with fellow federal and state regulators to increase awareness about the practical tools we offer to help investors make well-informed investment choices. It is also critical that we teach consumers how to spot and avoid financial fraud.”
The bulletin urges investors to do the following:
- Check your financial professional’s background to ensure that they are properly licensed and registered. Investors can verify that an individual is actually licensed—for free—at BrokerCheck.org, Investor.gov and SmartCheck.gov. These tools also allow investors to see if an investment professional has a disciplinary history or any past customer complaints. State securities regulators also provide detailed information about investment professionals.
- Save and embrace the power of compound interest. FINRA’s Retirement Calculator, along with the SEC’s compound interestand savings goal calculators, can help investors stay on target for a secure retirement.
- Understand the risks and fraud potential of initial coin offerings, or ICOs. Cryptocurrencies and ICOs have experienced rapid growth in recent years and have drawn the attention of fraudsters. If you’re thinking about investing in an ICO, check out FINRA’s Alert, Initial Coin Offerings—What to Know Now and Time-Tested Tips for Investors, the SEC’s HoweyCoins.com for a can’t miss opportunity and NASAA’s video, Get in the Know About ICOs.
- Avoid investing solely based on a celebrity endorsement. Similar to endorsements on products and services, some investment opportunities, including in the ICO space, may engage a celebrity to endorse and promote the investment. But a celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all investors
- Don’t invest using your credit card. Using a credit card to make an investment is not typical and may be a red flag for fraud. You should understand that most licensed and registered investment firms do not allow their customers to use credit cards to buy investments or to fund an investment account.
- Conduct due diligence with all investments and investment professionals. Whether investing in a U.S. Treasury bond, a Fortune 500 company listed on a national stock exchange or an ICO opportunity, a smart investor will always conduct due diligence on the investment. Due diligence is another way of saying carefully research the investment opportunity to make sure it is a smart decision. If you can, find third party sources of information about the investment.
- Know the value of diversification. Diversification helps protect the value of your portfolio if one or more of your investments perform poorly. Learn how to apply this key concept to your portfolio. When you diversify, you aim to manage your risk by spreading out your investments. You can diversify both within and among different asset classes. You can also diversify withinasset classes. In this case, you divide the money you’ve allocated to a particular asset class, such as stocks, among various categories of investments that belong to that asset class.
“Investing doesn’t have to be complicated. Following these simple tips can help U.S. investors make smarter investing decisions and avoid costly mistakes,” Walsh added.
In addition, on October 4, the FINRA Foundation and CFA Institute will mark World Investor Week by releasing a national report that explores the attitudes and behaviors of millennials—comparing those who invest through taxable accounts, those who invest only through a workplace retirement plan, and those who do not invest.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck or by calling (800) 289-9999. Investors can also call FINRA’s Securities Helpline for Seniors at (844) 57-HELPS for assistance with concerns or questions about their brokerage accounts and investments.
World Investor Week is sponsored by the International Organization of Securities Commissions (IOSCO) and has a dedicated campaign website, www.worldinvestorweek.org. The site provides details on the various participating authorities and important international organizations supporting the initiative.
