Trading has moved to the internet in the last decade, and with it moved the scams targeting traders and investors. Unsure if your broker is legit? Take the following steps to find legit brokers.
Pay attention to detail, and check for discrepancies in the data given to you. If the broker offers you deals that are too good to be true or gives you false information or promises, they are the red flags you need to be wary of the most.
When we talk of trading and investments, there is always a third-party risk, no matter which the financial market is. The safety of your funds depends largely on the broker you choose to trade or invest through.
Trading and investment scams are reaching their all-time highs with the dramatic increase in the involvement of retail traders and investors. When a third party processes the transaction of trades, then there is the third-party risk to consider, also referred to as a broker scam. So, to mitigate this risk, you will need to do extensive research on the broker’s authenticity.
You can verify the legitimacy of the broker in various ways. Consider the following points before you deposit funds with any brokerage or investment.
Choose a regulated broker, always.
Not all brokers are regulated by concerned authorities, and it is a problem. And hence, it is your duty as a trade or an investor to check the regulatory licenses of the broker.
Have a conversation with the firm’s customer support executives to get a glimpse of their service and quality. If the legitimacy of the broker is questionable, they will now allow you to contact them and ask questions directly, especially about their regulation, trading fees, and withdrawals.
Before you open an account, have a verbal conversation or engage in a live chat with the broker to gauge the transparency offered and the speed of their responses. This also allows you to know more about the broker.
Ask about their regulation, commission, spread, leverage, deposit, withdrawals, etc. You’ll be able to identify the broker’s legitimacy based on how they resolve your queries.
Do not engage with cold contacts.
When you have finally decided on trading or investing, an unsolicited advisory is definitely not where you want to put it.
One of the most serious red flags is a continuous demand for deposits. If you have been approached by the broker first and they are trying to convince you to deposit or open an account, there is a very real possibility that it is a broker scam.
Scammers in capital markets try to lure traders and investors into their gambit in various unique ways. Some of these are the promise of unreal returns, risks that lack logic, over-the-top bonuses, and any such thing that attracts beginners.
It is you who will have to avoid such unsolicited advertisements or advisory and not fall for enticing deals with no practical backing.
Research on forums and online reviews.
Conduct a simple online search about the broker to know about their essential and valuable details.
There are many online forums that have discussions on the broker’s services. You can get to know about the details of user experience and common issues that the clients are currently facing.
Do your research diligently and educate yourself to make better investment decisions. Before you deposit funds or open an account with a broker, thoroughly research the broker on the internet for any hidden and obvious red flags. A simple web search can also tell you if it is a broker scam.
You can check for reported complaints against the broker through the regulatory authority. Also, check the ownership details and financial statements of the broker. In addition, you can find out the broker’s tenure in the industry, its experience, complaints, or wrongdoings of the company or owners on the internet. If the broker is reputed, they will be transparent about their data and have their audited financial statements and ownership structure on the internet.
Genuine brokers are not hesitant to provide all their details like licenses, financial statements, documents, user agreements, and other details. Now, you will have to cross-check this data on the regulator’s website and third-party sources. Deposit funds only when you are satisfied with your research.
Do not go ahead with a brokerage or investment platform that promises high returns from the financial markets.
Suspect something? Withdraw funds and complain
If you smell something fishy about the broker, any suspicious activity or malpractice, withdraw your funds immediately.
Next, file a complaint against the broker to the concerned regulatory authority. Report unregulated or non-licensed, or bad actors in the industry to the authorities so other investors can be alerted and relevant action can be taken against them.
Trading and investing are risky in themselves, and if you add a broker scam to it, it becomes tricky to tread carefully. While you cannot completely eliminate risk since conmen and scammers are constantly searching for better methods to trick investors and traders, you can take a few steps to mitigate it.