We are fortunate in the state of Iowa to be served by financial professionals, the large majority of whom are competent, honest people who look out for the best interests of their clients in an appropriate fashion. Unfortunately, as with any industry, there are also those who engage in predatory and improper practices in connection with providing financial services, which can be labeled as financial fraud.
There are a broad range of people in the business of providing financial products and services, with examples including insurance agents, stock brokers, and bankers, just to name a few. Financial products consist of essentially anything in which the customer makes an initial investment, with an opportunity to have a future payout on that investment, including as a few examples, stocks, bonds, annuities, certain types of insurance policies, and real estate investments.
Financial fraud can similarly take several forms. First, the financial representative may lie to you (misrepresentation) about the product involved, including what its true cost is, what benefits the product will provide you, or what kind of profitability you can expect by investing in the product. Other financial fraud may consist of misrepresenting the amount of risk that is involved with the financial product, and the related issue of unsuitability, where the representative places you in an investment that is not suitable for you based upon your age, financial sophistication, risk tolerance, financial objectives, or otherwise. The financial fraud may also consist of unauthorized activity by the representative in connection with the financial product, where the representative makes an unauthorized purchase, sale, transaction, withdrawal, or in the worst case an outright theft in connection with the financial product.
A consumer's first objective should be to avoid becoming a victim of financial fraud. It is by far better to avoid becoming a victim of financial fraud altogether, than to try and address it after it has occurred. When we have represented people who have become victims of financial fraud, a very common theme is "what I was being told didn't seem quite right to me, but he/she was the expert so I trusted him/her." While there are many good reasons to seek out and rely on the advice of financial experts, you should never abandon your own common sense or instincts in the course of relying on that advice. Even if you lack experience or sophistication with the financial product you are dealing with, there is still a very good chance that your own instincts will alert you that the person you are dealing with is not looking out for your best interests.
Steps you can take to avoid becoming a victim of financial fraud include:
1. Deal with reputable well established financial representatives with a presence ideally in your area that has been established for at least several years.
2. Similarly, be very wary of unsolicited contacts by telephone, e-mail, or otherwise.
3. Carefully read what you are signing. Again, even if you don't have experience with the kinds of financial products you are dealing with, there is still a good chance that you can spot fees, costs, or other descriptions of the product that don't match with what the representative is telling you about the product. Similarly, ask questions about anything that you don't understand.
4. If it sounds too good to be true, it is.
5. Gather information about the financial representative before doing business with them. In Iowa, insurance agents, companies, and stock brokers are regulated by the Iowa Insurance Division. Their website is found at http://www.iid.state.ia.us/index.asp. With regard to stock brokers, you can find out information regarding their registration and certain complaints filed against them at the website of the Financial Industry Regulatory Authority (FINRA) at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/index.htm. While not going to contain nearly as complete of a list as the Iowa Insurance Division or FINRA, you can also check the Better Business Bureau, which has a website at http://www.bbb.org/, and you can type in your zip code to get to the Better Business Bureau nearest you.
6. Don't do business with anyone who makes a high-pressure sales pitch to you or who suggests that you must act immediately by signing documents with them.
7. Finally, read and retain all documents and statements you receive from the financial representative and in connection with the financial product and immediately question anything that seems improper or inconsistent with what the representative had told you.
In the event that you find yourself in the unfortunate circumstance of having become the victim of financial fraud, it is important that you act promptly to seek a remedy for that fraud. Steps you can take include:
1. Contact the financial representative to alert them of the problem and determine their response. Keep careful notes and records of all such communications.
2. Each of the authorities cited above, including the Iowa Insurance Division, FINRA, and Better Business Bureau, have provisions for filing complaints, which can be found at the websites given above. In addition, you can file a complaint with the Consumer Protection Division of the Iowa Attorney General's office, and that website is found at http://www.state.ia.us/government/ag/protecting_consumers/index.html.
3. You may also wish to contact a private attorney to assist you. There are numerous state and federal laws designed to protect the interests of consumers who become victims of financial fraud. Among other legal protections, in July of 2009, Iowa enacted a private right of action for consumer fraud, which in addition to other legal remedies would cover many forms of consumer financial fraud.
No one will ever look out for your financial interests as well as you. In seeking the assistance of financial representatives, don't turn over all decision making to them but rather carefully review, consider, and question what they are doing. If you believe you are the victim of financial fraud, act quickly and consider one of the options discussed above.