Brokerage Firm - Question 25

I have an account at a brokerage firm and I like my broker a lot. However, I read stories in the newspapers about brokers embezzling money from their customers. How can I protect myself against being ripped off?

First, never forget that no one cares about your money as much as you. Get involved in understanding your financial affairs - do not delegate this responsibility completely to a broker, financial advisor, accountant, friend, family member, or even your spouse.

You are responsible for:
1. Reading and understanding your statements, and looking for errors or omissions. Ask your broker or branch operations manager to explain anything you do not understand.

2. Examining your Bade confirmations to make sure they are accurate. File your statements in a loose-leaf notebook separated by month or quarter, and look for my changes in security positions.

To check whether a broker has been disciplined by a regulatory agency or by the NASD in the past, call the NASD toll free hotline at (1-800-289-9999). To find out if the firm is a member of SIPC (Securities Investor Protection Corporation) call SIPC-1-202-371-8300. All brokers and dealers registered with the SEC and with national stock exchanges are required to be members. The SIPC insures customers accounts in case the firm fails. The overall maximum is $500,000 per customer, with a limit of $100,000 in cash or cash equivalents. In addition to the $500,000 protection, provided by SIPC, some firms provide additional insurance. SIPC does not provide insurance against market risks.