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FINRA Issues Investor Alert Regarding Zero-Commission Online Trading

May 14, 2021 Blog

The Financial Industry Regulatory Authority (FINRA) works alongside the U.S. Securities and Exchange Commission (SEC) to regulate the securities markets in the United States, and it routinely issues Investor Alerts warning of risks for individual investors. Recently, FINRA issued an Investor Alert highlighting some of the key risks associated with the rise in popularity of zero-commission online trading. Here, securities fraud attorney Jake Zamansky shares his thoughts on FINRA’s recommendations:

Consider the Source of the Information

In its Investor Alert, FINRA places particular emphasis on being cautious of information shared on social media. FINRA notes that “social sentiment information . . . can lead to emotionally-driven or impulsive investment decisions, which can be a risky way to approach investing.” It is also important to keep in mind that much of the information shared on social media is misleading, and scam artists are increasingly targeting individual investors through social media platforms.

Understand the Risks of Investing on Margin

FINRA warns that individual investors need to be extremely careful about investing on margin. When you invest on margin, you can actually lose more (and perhaps significantly more) than you invest. Unfortunately, unscrupulous brokers and other individuals will encourage individual investors to establish margin accounts—knowing that these investors are likely to go into debt and end up owing money they never expected to owe.

Don’t Take Unreasonable Risks

Investing is inherently speculative, and this means that there is an inherent risk involved. But, when investing, there are reasonable risks, and then there are unreasonable risks that can leave investors facing substantial and unmanageable losses. In particular, FINRA warns against letting someone convince you to borrow against your home or take early withdrawals from your retirement savings: “Be aware that leveraging long-term assets for short-term gains can have significant consequences—from fees and taxes to risk of loss and more.”

Don’t Rush Into Investments

When investing on your own, it can be tempting to rush into opportunities—especially if there is a fear of missing out. But, it is far better to miss an opportunity than to pursue an investment that carries unnecessary risk (or that turns out to be fraudulent). As FINRA states, “some people have the means to take risky bets, but many of us do not,” and under no circumstances should investors, “sacrifice money [they] cannot afford to lose.”

Know When to Seek Help

Unfortunately, fraud is a very real risk for individual investors. As an investor, it is important to understand the red flags for fraud as well as the laws and regulations that protect you. If you have any concerns that you may have fallen victim to investment fraud, you should discuss your situation with a securities fraud attorney right away.

Request a Free Consultation with a Securities Fraud Attorney at Zamansky LLC

Are you concerned that you may be a victim of investment fraud? If so, we encourage you to contact us promptly. Call 212-742-1414 or contact us online to request a free consultation with a securities fraud attorney at Zamansky LLC.

Client Reviews

“Jake Zamasky and his colleagues represented me in a FINRA arbitration case against a large multinational bank and succeeded in obtaining an award for the full amount of my investment losses. I would highly recommend the Zamansky firm for their experience in securities litigation, their level of detailed research and case preparation, and their ability to effectively fight for what’s right.”

Richard R.

“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

Donald A.

“Jake Zamansky and his firm represented me in a FINRA arbitration case to recover investment losses. Jake and his team were very professional and worked very hard preparing for trial and then reaching a substantial settlement of our case. I would highly recommend them.”

William E.

“Jake Zamansky represented me in a FINRA arbitration case which allowed me to recover a substantial portion of investment losses. He is truly an expert in this space and I would highly recommend him to those investors who may have been been a victim of investment fraud.”

Chris K.

“Jake and his team did a great job communicating with me throughout the process of my lawsuit. I would recommend him to anyone looking to sue UBS for unethical practices.”

Mike A.
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