What to Do If You’re Dealing With a Shady Broker


If you see something, say something.

One of the major positives to come out of the post-financial crisis regulatory framework is that brokerage firms now take consumer protection much more seriously. Regulators basically camp out at every major bank, and the fines imposed for misbehavior are more onerous than ever.

But let’s be clear: There are bad actors out there, real wolves of Wall Street hiding in the dark corners of the finance world, working at obscure brokerages known as “bucket shops,” where investors continue to hand their money over for promises of immense riches that never materialize. (Truth be told, big Wall Street brokerage firms aren’t perfect either.) These outfits generally don’t employ professional compliance departments; plus, they often hire brokers who couldn’t get a job on Wall Street because of poor regulatory records (which you can find by searching the Financial Industry Regulatory Authority broker-check system).

If your broker is putting you in mutual funds, know that you’re paying two fees—to your broker and to the fund, which is often managed by the broker’s own firm. This double-dipping is common among the big banks, and most brokers are loathe to point it out.

Still, it’s best to keep your money at a big firm or a reputable regional brokerage. And if you see something weird in your account? Regulation is on your side.

Charles Gasparino is a Senior Correspondent at Fox Business Network and a columnist for Men’s Fitness. Follow him on Twitter.

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