Doing Financial Research and Why It’s So Vital

Consumer protection, Money, Tips & how-to

Daniel Carlson is a lawyer in San Diego focused on securities litigation who specializes in recovering investment losses for his clients.

While many people invest a lot of research into a product prior to buying it, investment decisions should not be any different. Realistically, investors would be wise to invest even more time and more effort into investment firm research. It takes effort to earn an income and this money needs to be taken care of accordingly. Therefore, you should know before investing who it is that you are entrusting this money to.

Use the Internet

As a first line of defense against investment scams, investors should utilize the same research tools as they would for other items that are regularly purchased, such as Bing and Google.  Many specific financial research websites also exist.  Also, be sure to understand all the terms used, the web can be very helpful when you encounter terms related to investing you may need to research further to understand.  If someone was looking to purchase a car, for example, they would most likely use a search on the internet to do research on cars prior to their decision to actually buy or lease one. Similarly, when performing research on a prospective financial advisor, the principle remains the same: the more information gathered, the more informed the decision becomes.

Recently, an advisor was given a four year, nine month prison sentence following a conviction for investment fraud; he was also forced to return $2.4 million that he had stolen from unsuspecting investors. Unfortunately, these investors had trusted this man with their money even though he was already debarred by the New York Stock Exchange and directed to “cease and desist” by the California Department of Corporations.

Janamjot Singh Sodhi ran a Ponzi scheme and promised high returns in a very short time period from 2005 until 2011. Though debarred back in 2006 and directed to cease and desist back in 2009, Mr. Sodhi collection from investors continued. If the investors involved has performed some preliminary research on Mr. Sodhi, they likely would have found that he was operating a fraudulent venture prior to their decision to entrust him with their money.

For the most part, Ponzi schemes or other investment schemes may not be as clear. Knowing certain obvious signs can go a long way in determining whether or not there is fraud involved. An advisor who requests that you make the check out to them personally or who guarantee certain high returns are sending you red flags about where they may be going with your investment, for instance. Another tool useful for investors is FINRA’s BrokerCheck®, a research instrument for examining investment firms’ and brokers’ professional backgrounds if they are FINRA registered. These are the kinds of simple but important preventive measures that can be taken by anyone, so make sure that you do some research before deciding to hand your money over to someone else.

If you believe that have been the victim of a Ponzi scheme or another kind of investment or securities fraud, please feel free to contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300.