How do investment advisors detect securities fraud?
Investment advisors detect securities fraud by being aware of the signs and by taking proactive measures. Red flags of securities fraud include an investment that claims to be “low risk” but offers high returns or an investment that has no track record or lacks disclosure regarding the security. Additionally, investment advisors must be aware of any changes to the investment advisor’s regulatory registration or any disciplinary or legal actions that could indicate a risk of fraud. Investment advisors employ other measures to detect fraud. Professionals must proactively monitor their customers’ accounts for unusual activity and verify the identity of investors. Additionally, financial advisors are required by West Virginia law to verify the accuracy of customer account information. These measures help to ensure that customers are receiving accurate account information and reports and that advisors are not participating in fraudulent activity. Furthermore, investment advisors should take steps to ensure compliance with the securities laws of West Virginia. They should use a written agreement with their customers, supply account information and reports to customers in a timely manner, and audit customer accounts periodically. These measures help to ensure that investment advisors are keeping accurate records and following the state’s laws and regulations to help prevent and detect securities fraud.
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