This is not to imply that every online investment is suspect. In fact, many investors use the Internet to trade safely on a daily basis without ever becoming victims of stock fraud. What sets these investors apart is that they are aware of the risks, and know how to avoid the potential dangers.
Click with Care
If you choose to trade online, realize that the ease with which you have access to trades is mimicked by the ease with which investment firms have access to your money, meaning you could become a victim of securities fraud before even realizing there is a problem, unless you are constantly monitoring your accounts.
Some firms, for example, may delay sending investor attorney you trade confirmations. From your end, all you know is that you are clicking a confirm button, but the page is hanging, or refusing to reload. If you’ve ever worked with a slow printer, you know that if you click the “print” button 16 times, you may end up with 16 copies of your document. Resist the urge to repeatedly click the “trade” button or refresh the webpage. If you do, chances are that you are in fact repeating the trade.
The biggest problem with this is that you may have difficulty pursuing an investment fraud case when the firm providing the trades can easily blame a technical malfunction, or point out that you did, in fact, complete the trade 16 times.
Set Limits on Transactions to Avoid Securities Fraud
You can protect yourself from stock fraud, and from unintentional expenditures, by setting maximum limits on how much you are willing to pay for a particular stock. If you fail to do this, you could find yourself paying an excessive amount, especially when dealing with more volatile stocks.
The other side of this is that you should always set a minimum limit to avoid letting go of stocks at too low a price and losing out on expected profits.
Watch for Hidden Fees, Which May Constitute Investment Fraud
This can also be stated as, “read the fine print”. Online investments often carry fees in addition to those involved in standard trades. If you choose to invest online, it is more important than ever that you scour every agreement you sign. The fact that these trades take place in the nebulous world of the Internet doesn’t make your agreements any less binding.
Unless the fee was actually omitted from your agreement, you may have little recourse when attempting to pursue an investment fraud case against the broker. On the other hand, don’t assume that you agreed to a fee simply because you were charged for it, particularly if you don’t remember seeing the fee detailed in your agreement.
Be Aware
Avoiding securities fraud is really no different than avoiding any other type of fraud when it comes to knowing precisely how much money you should have at any given time. If you work with a broker who carries an account balance for you, know your minimums. Dipping below those thresholds could subject you to further fees.
What to Do if You Suspect Stock Fraud
If you suspect you’ve been the victim of fraud, or even if you are considering working with a broker but notice suspicious behaviors or vague wording in your agreement, the U.S. Securities and Exchange Commission (SEC) has a number of available online tools for both researching brokers and reporting complaints.