There are many investment options from which investors can choose. Offerings that are nuanced or appear to offer investors high yields may stand out from the pack.
It’s your fiduciary duty as a financial advisor to be clear with your clients about the benefits and risks that they might derive by making certain investment choices. Your failure to apprise investors of things they need to know and give accurate information could result in allegations of securities fraud if you’re not careful.
How mistakes can lead to suspicion of fraud
One of the primary reasons financial planners face securities fraud charges is because they guide their clients in making unwise investments.
Financial advisors often find themselves in difficult positions if they:
- Rely solely on a company’s reports (which could be inflated) without doing any due diligence on behalf of their investors
- Using “insider information” (or appear to do so) from their personal or professional contacts to guide them as they give advice to their investors or take action on the behalf of those investors
- Making account transfers or investment decisions that your clients didn’t clearly authorize
- Getting involved in high-risk or speculative investments
- Failing to communicate regularly with their clients or being mostly unresponsive to their concerns
- Getting involved in “pump and dump” schemes to turn a quick profit for certain clients
Naturally, there are investors who will stubbornly refuse to accept that all investments carry a bit of risk. When they lose money, you may be blamed even if you did everything right.
Don’t take securities fraud allegations lightly
Both states and the federal government have regulatory agencies that oversee the actions of financial advisors. They report any impropriety that they uncover to prosecutors, who have seemingly endless resources to investigate potential crimes. Merely having a clean conscience regarding your actions won’t always sufficiently protect you if an investor is convinced you’ve done something underhanded.
You’ll come to appreciate the guidance that an attorney can provide when you’re facing securities fraud allegations. Your lawyer will advise you on what to expect along the way to give yourself the best chances of preserving your career.