When you are signing up with a broker for trading, it is normal for you to assume that they will represent your best interests at all times. Their job is to help you make more money and in doing so, they earn a fee for their services. Unfortunately, in today’s modern age, scams have become quite common and online market share broker scam can also happen. It is when these brokers put their own financial interests above yours They violate the trust you have put in them and cause you to lose hundreds of dollars . These days, the number of such scams have gone up. But, before getting into its details, it is important to distinguish between broker fraud and normal investment losses.
Because lose money through your investments doesn’t mean that you are a victim of online scam. It is natural for the markets to fluctuate and incurring some losses is a common part of the investment process. No broker can insure you against market risk. But, beyond the realm of these normal investment losses,brokers often cross the ethical standards. They place their interests above yours, and you end up being a victim of broker scam. To figure out if you are a victim of scam, you need to know the different ways online market share broker scam can happen.
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Want to know more? Read on to find out:
Unsuitable investments
Brokers have the responsibility of understanding their clients. Their risk tolerance, investment experience, income, financial needs, other assets and investment goals. They access these qualities before they can recommend an investment to them. Therefore, legitimate brokers only recommend investments after they study your portfolio and understood your situation. If they recommend any unsuitable investments that are not in accordance with your goals and risk tolerance, it is deemed a fraud.
Omitting or misrepresenting facts
Your broker may provide misleading information or withhold material facts t which can impact your investment decision. It is considered an online market share broker scam. Professional brokers would never do this to their clients because their goal is to work in the client’s best interest. Information like liquidity, sales-related compensation, risks, trading fees and so on. Or, something that can influence your trading decision should be disclosed to you straight away. If the act is deliberate, it will fall under the category of fraud or scam, but if it is an honest error, it will be regarded as incompetence.
Over-concentration
Sometimes, people also suffer excessive losses in their portfolio because most or nearly all their money is invested in one market sector or instrument. This could be because your broker is over-concentrating rather than diversifying. Portfolio diversification has been proven to be an effective way of reducing risks and your broker should help you accomplish this goal rather than doing the opposite. If they don’t do so, it is regarded as investment fraud.
Unauthorized trading
A very common online market share broker scam is when your select broker trades on your behalf. Just because you open an account with them doesn’t give them the right to take decisions. Especially when you do not grant them permission. If you permit them, then it will not be seen as a scam. However, where take action without your consent or knowledge, it will be considered a scam. Especially if that trade results in heavy losses for you.
Churning
This happens when the trading activity in your account becomes excessive. And, your broker claims that they are simply trying to pursue more profits. But, you should note that churning is also a kind of online market share broker scam. Because, it is mostly done by those who receive commission for every transaction. Brokers start churning because higher transaction frequency will result in increased commission for them. Which is an incentive for them, but may not be in your best interests. If you have given discretionary authority , then you need to keep an eye on trading activity closely. Monitor them to determine whether they are being fair to you or if you are scamming.
Timely execution
Has your broker ever failed to execute your trade on time? The law requires them to execute all your orders promptly. And, not doing so is just another online market share broker scam. Because, it may go against their interests. If they refuse your order or delay it deliberately, there will be a good reason. And, brokers do it to scam clients. Authentic brokers will never delay any trades. Because, their aim is to help their clients make the most profits from their investments.
Unregistered or unlicensed
No matter what financial product a broker sells, or service they provide, they must first register. A genuine broker will not hesitate to go through the legal process. And, fulfill all requirements to obtain a license and start.. But, if the broker you find is unregistered and unlicensed, there is a good chance it is another online maret share broker scam and they will vanish overnight with your funds, leaving you empty-handed.
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Lack of information
A clear sign of a legitimate online market share broker is that they will be upfront about their company, services, terms and conditions, policies and their costs. Unlicensed and fraud brokers, on the other hand, will provide very little information, and what information is available is quite vague. If you want to steer clear of an online market share broker scam, you should never sign up with such shady brokers and always do your due diligence. In case that you do end up becoming a victim of such scams, there are services like Money-Back that can come in handy and help you recover your investment.
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