Over the last few years there has been much bad press about the stock market and financial advisers. Actions taken by a few corrupt individuals have made many investment companies take a second look at their practices to ensure that their advisers are working in an ethical manner. Companies and independent representatives must make a great effort to rebuild trust among potential investors.
What steps should an independent adviser or investment company take to ensure their practices are ethical and within the law? The following five suggestions should help any person or company stay on “the right track.”
1) When in doubt – hire an investment fraud attorney A securities fraud attorney can review any prospectus, deal or other financial instrument and determine if it is within the guidelines of the law. Sometimes it takes a neutral, yet professional, opinion of a financial instrument to determine if things stated or being offered are fraudulent.
2) Consider the source If you are being asked to push a particular investment product, step back and ask yourself why. If you feel that there is anything that could be considered fraudulent, report your findings to the correct authorities and refrain from offering this option to your clients.
3) Refrain from making guarantees on performance Often, zealous sales reps or financial advisers that are trying to land a client will make guarantees on the performance of a financial product that they offer. This can be seen as fraudulent activity because there are no absolute guarantees in the market. Offering past performance reports, or providing current information on performance of a specific financial product should be the extent of the information that you provide your clients.
4) Create redundancy When any product has been sold, it should be reviewed by another independent person to confirm that the transaction was legitimate. This extra step will help prevent fraudulent products from being sold or inaccurate transactions. While this may cause a small additional cost to the investment firm, overall it will be well worth the effort.
5) Does it pass the “Mom” test? While this may sound silly, one of the best ways that you can stay within the ethical guidelines when selling or offering financial products is to honestly ask if you would recommend or sell it to you own mother. If you can honestly answer yes, there is a good chance everything taking place is ethical. If you are leery of the transaction, and from your personal experience and knowledge you would recommend your mother stay away from the risk, chances are you may be breaching ethics and should not offer the product or service to anyone else.
Of course, these are not the only ways to prevent fraudulent actions from taking place in this industry. Companies should institute the proper training and educational programs necessary for their representatives, and monitoring should be conducted as often as necessary. Additionally, the services of an investment fraud attorney are invaluable for this type of situation. Every precaution should be taken to make investing safer for the consumer, the adviser and the investment house.
Ann Bailey formerly reported on business ethics for TV, and now contributes web articles on the subject. The highly experienced securities fraud attorney based in Atlanta, Page Perry LLC, represents clients both offering and buying investment advice, keeping all involved on the ethical side of the equation.
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5 Tips for Staying in the Investment Biz: Prospering Under Scrutiny
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