In a hissy fit of exaggeration, though, AdvisorOne passes along the inane idea that there is a "nationwide surge" in investment fraud, citing 1,241 regulatory actions in 2010 "more than double the 506 cases in 2009". The problem is "rampant" they chortle!
Well, we need some adult perspective here. If we eliminate the thousands of independent RIAs like myself, the top 16 broker-dealers have about 90,000 investment advisers working for them. Even if all of the regulatory actions were against individual advisers (some of the more serious were against their firms), that's a rate of just over one-tenth of one percent. To be more clear, that means out of every thousand advisers, one is a crook. "Gary, are you crazy? Defending your detestable competitors in the brokerage community?" No, I'm just trying to temper journalistic sensationalism. I mean, suppose in 2011 two of every thousand brokers were crooks. Oh no! Doubled again! Form another Federal agency!
All kidding aside, there are still serious concerns:
- Those are just the ones who got caught
- Breaking the law
- And didn't quickly make things right to avoid regulatory action
- The law still does not hold Wall Street to a fiduciary standard, remember? Astoundingly, it is still legal for them to put their interests before yours. So even though brokers have a fiduciary relationship with their clients (click on that link to see the definitions of "fiduciary") they do not have a fiduciary obligation. It is unbelievable what it is still legal to inflict on the public.
The State of Oregon has some great guidelines here for avoiding victimization by nefarious schemers here:
Avoid Investment Fraud and Abuse In addition, you can subscribe to their Consumer Alerts. I think their most important bit of advice is don't be embarrassed to report getting ripped off. You may help save someone else's life savings and/or recover your own. Most of us are no match for a skilled con artist.
Of course, it's best to avoid getting ripped off altogether by dealing only with independent Registered Investment Advisers who are legally required to put your interests first.