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As an investor, you have recourse if a broker or advisor has been unethical,
unprofessional, or criminal in his or her conduct. If the offending agent is working for a
brokerage firm or bank, a complaint to a superior is sometimes all that is needed. The
firm would prefer not to risk its reputation for one “bad apple.”
If you are not satisfied, however, you can lodge a formal complaint with a professional
organization such as the relevant SRO. The SROs have standard procedures in place and
will investigate your complaint. If necessary, the offender will be punished by a
suspension or permanent removal of his or her professional designation or certification.
You can also complain to the SEC or a state or federal consumer protection agency, file
suit in civil court, or press for a criminal complaint. Due to their complexities,
investment cases are often somewhat difficult to prove, so you should consult with an
attorney who is experienced with such cases. Often when a broker or advisor has used
illegal practices, she or he has done so with more than one client. When you are not the
only victim, the state or federal prosecutor or your lawyer may choose to bring a class
action suit on behalf of all the client-victims.
As always, the best defense is to take care in choosing an investment advisor or broker.
Most investment agents are chosen by word of mouth, recommendations from trusted
family members, friends, or colleagues who have been satisfied clients. Before you
choose, check with the professional organization with which he or she claims affiliation
or certification and review any records of past complaints or offenses. You can also
check with government agencies such as your state’s attorney general’s office.
Your choice of advisor or broker depends largely on your expected use of services, as
suggested in Figure 14.7 "Choosing an Investment Advisor or Broker".
Figure 14.7 Choosing an Investment Advisor or Broker