This alert is issued jointly by FINRA, NASAA and SIPC.
How often should you check the accuracy of your brokerage account statements?
When was the last time you read your brokerage account statement? For many of us, the answer may be “some time ago” or maybe even “never”.
The best answer is: monthly or quarterly. Why? Because one of the best ways to protect your investment portfolio is to monitor your holdings and activities. You should get into the habit of regularly reviewing online or paper account statements and transaction confirmations. You should review your statement as soon as you receive it to confirm that it correctly reflects your investment decisions and all actions taken or authorized by you during the period covered by the statement. Also check your completed account statement; don’t just look at the summary page.
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What if something goes wrong?
Most investors never encounter errors or problems with their account statements. However, errors can occur; and when they do, it is important to respond to them.
Do you see a trade, withdrawal, or transfer that you didn’t discuss or authorize? Perhaps a new tax has arisen? Or maybe the cash balance in your account has changed since your previous statement and you don’t know why.
Most of us promptly notify our bank or credit card company if we see a charge or other account activity that we don’t recognize or understand on our bank or credit card statements. However, regulators regularly speak with investors who have questions about their account statements or trade confirmations, but are reluctant to contact anyone because they “are not sure something is wrong”. and “don’t want to get anyone in trouble”.
If you receive an account statement or trade confirmation and say nothing, the brokerage firm, regulator, or organization such as SIPC may assume that you authorized trading or other activity on the account. If you did not authorize trading or other activity, you should contact your broker immediately to challenge the inaccuracy or discrepancy. Keep written notes of your conversations, including the names of the people you spoke to and the topics discussed, as well as the time and date of the conversation.
If you do not correct the errors, the broker, registered investment advisory firm, a regulator or an organization such as SIPC may assume that you authorized trading or other activity in the account.
When should you consider sending a written communication to the company?
In addition to contacting your broker, there are some instances, such as those described below, where it is also appropriate to send written communication – by email or letter – to the brokerage firm’s branch manager or other representative of the brokerage firm. Contact information for your brokerage firm should be available on your account statement as well as on the firm’s website. Remember to keep a copy of all written communications.
As stated on the SIPC website, “If you ever discover an error in any trade confirmation or brokerage statement, you must immediately bring the error to the brokerage firm’s attention in writing. Unless you complain in writing, your eligibility for SIPC protection may be compromised.”
In particular, you should put your concerns in writing in the following situations:
1. Problems with your account statement: You see something on your account statement that you didn’t authorize or that pertains to you. Here are some examples :
- Cash balances change unexpectedly in your account, for example:
- An unexpected increase in the amount of money in your account, which could be the result of a data entry error by the brokerage firm, but could also indicate that someone has sold securities without your consent; Where
- An unexpected decrease in the amount of cash in your account, which could indicate an unauthorized purchase, transfer or withdrawal.
- Missing titles from your account or otherwise unaccounted for.
- Professions you have not authorized or which seem unknown.
- Costs debited from your account that you do not understand.
2. Errors on your transaction confirmation. For example, errors in the number of shares bought or sold or the price at which the transaction took place.
3. Troubling answers from your broker: While most investment professionals will work hard to address your concerns and eliminate any errors, you may find that a broker’s response raises potential red flags, such as:
- No response— Unreturned phone calls and no response or response limited to emails or other written communications.
- Disengagement—Statements to the effect of “everything is fine” or “there is nothing to worry about” even if the problem is not resolved.
- Lack of reliability-No follow up after promises that a situation is “taken care of”, such as:
- notifying you that the problem has been resolved but that you have not received a written verification or account statement reflecting the correction, or that you are promised to receive the amended statement “at a later date”; Where
- Declare that an unauthorized transaction or withdrawal of funds will be processed (by canceling the transaction or redepositing the funds, for example), which does not occur.
- Inconsistency— Different responses regarding the resolution of the problem from your broker or from different people within the company.
- “Private” Communications or Settlement Offers—Communication via the broker’s personal email; or attempts to settle with you directly or “off the books” without involving the branch manager or brokerage firm – by writing you a check, depositing cash or securities into your account, or offering you other compensation .
Sending written communication to the branch manager or brokerage firm in each of these situations is important because it allows:
- You: If the company does not address the matter and proceeds to arbitration or mediation, your written documentation can help substantiate your claims and preserve your eligibility for SIPC protection.
- Other investors: Your written communication alerts the company to potentially questionable activity which it can investigate further, and possibly identify and remedy similar or related harm to other investors.
- The brokerage firm: Your written communication gives the company an opportunity to educate brokers on procedures to prevent future mistakes or, if necessary, to discipline employees, especially if there is evidence of prohibited activities. Additionally, companies have a regulatory obligation to report certain types of incidents to regulators. This information can then be made available to the investing public so that investors can make an informed decision when choosing a broker or brokerage firm.
When should I contact a regulator?
If you contacted your broker, branch manager, or firm and they did not resolve the issue, or if you have other concerns, contact FINRA online or by phone at (301) 590-6500. You can also file a complaint using FINRA’s online complaint center or contact your state securities regulator.
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