Typically, tax time, April and the month before, and year end are the times that we see the most outrageous claims for investments. If you have been watching the financial press you have seen a number of articles on high profile investment advisors finding themselves in big trouble for various indiscretions, ranging from outright thievery to insider trading.  The Securities and Exchange Commission has brought a record number of actions in the latest fiscal year.  FINRA, another regulatory body watching the financial industry has also been busy.

Generally the headlines speak of multi-million dollar to multi-billion dollar cases. Recently, we have seen a number of cases with local flavors. A famous athlete cheated by his financial advisor.  A charity victimized by its financial officer.  Bad times bring out the worst in people.

There are steps that we can take to protect ourselves from financial criminals.  Nothing is foolproof, but excercising care will lessen the odds of anything happening.  MG Global, a recent very public failure, is having a heard time explaining what happened to $600 million of customers money.  These funds were supposedly held in segregated accounts and could only be impacted by losses or gains on investments.  

If you are going to open a discretionary account, one that allows the advisor to make investment decisions for you, it is your responsibility to carefully monitor that account on a frequent basis. We are not in favor of discretionary accounts, but many feel confident enough to takepart. Before you open one, investigate and compare.  Ask for documented track record information and referrals.  Call the referrals. 

If you see a promotion or ad for an investment product that is offering an unusually high rate of return, don't just accept it at face value. And don't accept the credibility of an advisor without exercising due diligence. Recently a Wilmette advisor was indicted for misdirecting client funds for his own use.  This person had been convicted a number of years ago of the same crime.  FINRA has a web site with an application called Broker Check that would have revealed this information to anyone making inquiry.  There are some excellent investment products, and some of them will produce excellent returns, but no one should get involved without careful scrutiny and investigation.

The attorney general's office, the two agencies mentioned above, google searches can all produce valuable information that could help avoid a serious financial mistake. One simple caveat that we see ignored constantly is "if you don't understand it, don't get involved". Peter Lynch, the legendary manager of the Fidelity Magellan fund always said "buy what you know".

 It is painful enough to see hard earned money list in investment declines, but tragic to be cheated when it could have been avoided.  Take time and do your homework.