Investment agencies and banks are meant to help safeguard and grow your hard-earned money, and yet for some, it’s where they lose it all. A frightening truth yes, but sometimes, those we entrust with our finances are actually the ones seeking to ruin our lives.
Bank Fraud: Any illegal act involving the use of deception to obtain money or other property from a bank’s depositors or other financial institutions. Justia: Bank Fraud
For most, when we think about bank fraud, you probably imagine something like those typical online scammers trying to steal your accounting information that we are always being warned about. But what happens when the people that are stealing from you come from inside the banking organization itself? While most advisors strive to operate with integrity, and to work toward the best outcome for their clients, there exist many instances of malicious ‘professionals’ actively deceiving and stealing from their clients.
Take most recently, the well-known Usain Bolt, eight-time Olympic gold medal winner, house hold name of the track and field sport and esteemed record holder in the genre. In January of 2023, it was brought to public light that Bolt had reportedly discovered a hefty $12million dollars missing from his account, which was part of Bolt’s retirement and lifetime savings. The account was held with a Jamaican based investment firm named Stocks and Securities (SSL). And according to local Jamaican newspaper The Gleaner, “…a former employee at SSL has been implicated in a massive fraud at the entity, including the missing sums of Bolt’s account.”
In light of the ongoing investigation, it is implied that Bolt was blatantly robbed from within the firm itself.
But how? How does so much money go missing without anyone realizing? Is what you might be asking yourself. Interestingly, there are several ways in which persons within your banking/investment organizations could go about siphoning your account.
In 2022 a former securities broker and investment adviser with UBS, a global firm providing financial services in over 50 countries, by the name of German Nino, “…was charged with stealing $5.8 million from a long-standing client.” In this case alone Nino was found to have, “…created fake account statements, forged signatures on letters of authorization, and altered UBS’s records for an affected account to prevent electronic notifications of wire transfers.” U.S SEC.
Of course, all these actions are illegal, but the ability to do them does exist and the risks are real. Particularly for those in the investment space, and those seeking to enter it, a question now looms, “Am I being robbed by my financial advisors?”
To better defend yourself against scams and fraudulent acts, here are 3 things you should be on the lookout for when it comes to your portfolio and those who aid you in managing.
You Aren’t Receiving Account Statements
Patrick Villanova, Personal Finance Expert cautions that, “Qualified custodians must send statements to account owners, at least quarterly.” Presentation of what they are holding on your behalf is mandatory and serious concern should be had if you are not receiving them. “The SEC recommends contacting your advisor and/or custodian and finding out why.” Villanova further informs.
Excessive Trading or Churning
If your advisor is adamant about engaging in a large number of trades or transactions on your account, you could be experiencing Churning. Here, the primary goal of this advisor is actually to generate greater commissions for themselves. According to the Sonn Law Group, “The frequent buying and selling of securities is rarely in the best interests of an investor, especially a long-term investor.” And “In effect, churning simply transfers the investor’s money over to the financial advisor in the form of unnecessary fees.” They go on to say that churning can result in you, the client, losing much of your invested money.
It is the fiduciary responsibility of those handling your finances to ensure that all purchases are consistent with your own personal objectives as laid out by the FINRA Investment Suitability Rule 2111. Be mindful of any recommendations made that seem not to be exactly on track with your goals. In particular, it is advised to pay keen attention to Variable Annuities or trades that involve multiple options. These types of trades can often pose a greater risk to the investor, but if all goes well, can result in a higher payout and consequently higher commissions for the financial advisor. As you can see, an unscrupulous advisor may choose to advance trades that are not necessarily in your best interest in the hopes of higher commissions on more ‘risky’ options.
None of this is to say that there is no hope for us! Banks and financial professionals operate by and large with integrity over the assets they oversee. Unfortunately though, as is with many things in life, it also comes with some amount of risk. If they’ll do it to Usain… they can do it to you.
Try to be mindful of your risks and good luck in your goals!