If you’ve been investing for a while, you know that few things are guaranteed in the investment world, and taking some level of risk with your money is inevitable. Still, you want to feel confident that you’re part of a fair system governed by clear rules. So, you may wonder, “Who’s looking out for me?”
Fortunately, you’re not alone. Several government agencies and industry groups work to protect investors. Let’s take a quick look at some of them:
* SEC – The Securities and Exchange Commission (SEC) was created in 1934, in the midst of the Great Depression, to restore investor confidence in U.S. capital markets. The laws that created the SEC were designed to ensure that companies selling securities must tell the public the truth about their businesses, the securities they sell and the risks involved. The SEC may investigate a wide range of violations, including outright theft, price manipulation, insider trading and misrepresentation or omission of key information about securities, To get a more detailed understanding of what the SEC does, go to their web site at www.sec.gov.
* FINRA – The Financial Industry Regulatory Authority (FINRA) was created in July 2007 through the consolidation of the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange. FINRA registers and educates financial services professionals, writes and enforces rules, enforces federal securities laws and educates individual investors. You can learn more about FINRA by visiting its web site at www.finra.org.
* NASAA – The North American Securities Administrators Association (NASAA) licenses brokerage firms and their agents, investigates state law violations, initiates enforcement actions, and educates the public about investment fraud. For more information, visit NASAA’s website at www.nasaa.org. Agencies like NASAA, along with others in the investment sector, work diligently to protect investors’ interests. A fair and transparent capital market strengthens investor confidence, benefiting the financial system as a whole.
But despite the work of these agencies, you still need to take steps to defend yourself against unpleasant surprises down the road. Here are a few ideas to consider:
* Understand your investments. Never put money into something you don’t fully comprehend. Before committing, ensure you know precisely what an investment entails, including its potential benefits and risks.
* Know your risk tolerance. If you’re losing sleep over your investments, you may be taking on more risk than is appropriate. However, there are times when stepping outside your comfort zone can be necessary to achieve your financial goals. For example, if you invest too conservatively, your portfolio might not grow enough to keep up with inflation, which, over time, can seriously impact your financial security.
* When choosing a financial advisor, it’s essential to work with someone who understands your unique situation. An ethical, professional financial advisor—someone who is attuned to your needs, goals, and investment preferences—will recommend only those investments that are appropriate for you. However, if you ever feel uncertain about the advice you’re receiving, consulting with financial advisor fraud lawyers can provide you with the guidance you need to ensure your investments are being handled correctly and ethically. This proactive approach can help protect your financial future and give you peace of mind.
Understand your risk tolerance. By staying informed about regulatory agencies and making educated decisions, you can feel confident in your investment abilities — and that’s a great feeling to have.