State at 1-800-688-4507. The Division NORTH CAROLINA DEPARTMENT can verify whether the firm and broker are North Carolina Department of the OF THE SECRETARY OF STATE licensed to do business in the state or have Secretary of State SECURITIES DIVISION been disciplined by any regulatory agency. Hon. Elaine F. Marshall IF YOU HAVE A PROBLEM Secretary of State Most dealings between customers and brokerages are straightforward and trouble CHOOSING A free. Sometimes, problems arise. Excessive trading in your account, called “churning,” unauthorized trading, unsuitable recommen- STOCKBROKER dations, or failure to execute trades or deliver securities are examples of some of the problems you might encounter. If your broker confirms stock trades that you don’t recall approving, contact your broker right away. Erroneous trades usually can be straightened out if they are caught in time. However, if you wait until the mistakenly purchased stock performs poorly, your delay For more information, can be used as evidence you agreed to the please contact us at: trade. Read and understand the monthly or quarterly account statements you receive NC Department of the Secretary of State from the brokerage. Securities Division P.O. Box 29622 Be sure nothing occurs in your account Raleigh, NC 27626-0622 without your permission. If you don’t under- Telephone: stand something, or if it’s inconsistent with 919-814-5400 Toll-free: (800) 688-4507 your intentions, contact your broker or the brokerage’s office manager immediately. Fax: (919) 821-0818 Failing there, you should notify the Securities Division. Meanwhile, send a letter detailing Email: [email protected] your problem to the brokerage’s chief compli- ance officer. (For more information, see our Visit us on the Internet at: brochure entitled Resolving Problems With http://www.sosnc.com Securities Firms.)

The North Carolina Department of the Secretary Don’t think you can become of State’s Securities Division gratefully acknowledges a victim of fraud? the assistance of the North American Securities Administrators Association, Inc., and the Every week there are new reports of victims Pennsylvania Securities Commission. being cheated out of their money. To read All Rights Reserved. some of these stories, visit our web site at: http://www.secretary.state.nc.us/ 15,000 copies of this public document were printed sec/nasaa.aspx. courtesy of the North Carolina Investor Protection and Education Trust Fund (N.C.G.S. §147-54.5) at a total cost of $1,396.00, or $0.093 per copy. Millions of Americans from all walks recommend specific stocks or investment of life own shares in America’s public strategies. companies. Still, investing in the Selecting a broker is highly personal. While stock market is a complex business. you might seek recommendations from friends Frequently, a good stockbroker or or trusted professionals, remember that some- one else's broker might not be suitable for you, other financial specialist is an given differing financial situations, needs and essential element of success. philosophies. Be wary of unsolicited investment advice. (For more information, see our brochure YOUR GOALS entitled Affinity Fraud). Is your primary interest long-term growth, When you first visit a brokerage, the office steady income, tax savings, quick profits or manager may be able to steer you to a broker some combination of each? Your financial who’s particularly knowledgeable in your areas situation is your best guide to choosing an of interest. When you meet with a broker, treat investment. it as an interview. Don’t be intimidated. Ask Various books and financial publications questions and listen to the answers. No question available in the business section of your public is dumb or silly when it comes to understanding how your money is invested. library may help you develop an investment • When a broker recommends a security, it strategy. Also, many schools offer low-cost You may be asked questions about your finan- should be based on sound reasoning rather courses on the basics of personal investing. cial situation and investment experience. Don’t than a hunch or a tip. Be realistic. Remember that no investment is mistake the line of questioning for an intrusion • The kind and amount of service depends on risk-free. As a rule, the greater the potential on your privacy. Brokers have a responsibility the rules that you and the broker establish return, the greater the risk. Some questions to “know their clients” and must use “due when you open your account. The frequency to ask yourself include: diligence” when opening new accounts. with which your broker calls should be con- sistent with the size and nature of your • Do I have sufficient cash reserves in a safe The broker also has a duty to recommend only portfolio. place — such as a federally insured savings those investments suitable for you based on account — and can they be reached easily your financial goals, your other securities hold- • Make sure that the firm’s products, services, in an emergency? ings, and your financial situation. You should recommendations and commissions are compatible with your goals and that the • Do I have adequate life insurance? notify your broker whenever your investment goals or financial situation changes. (For more broker you choose helps you reach those • Can I afford to lose the money I plan to information, see our brochure entitled goals. invest? Even if you have substantial assets, Unsuitable Investments.) • Find out whether the brokerage is a mem- that doesn't mean every investment is appro- ber of any national stock exchanges, the Take your time selecting a broker. It is impor- priate for you. Only invest in securities you NASD or the Securities Investors Protection tant to establish a relationship of mutual trust, understand, and only if the risk is within Corporation (SIPC). SIPC insures the cash respect and understanding. Don’t hesitate to ask your comfort range. and securities of its members’ customers a question or to say “no" to a recommendation in case a member brokerage falls into that doesn't fit your investment strategy. CHOOSING YOUR BROKER bankruptcy. SIPC provides no protection When choosing a broker, consider whether against fraud, provides no guarantee of you want a full-service or a discount broker. OTHER TIPS investment return, and should not be con- Discount brokers generally are paid a straight • When interviewing a broker, request docu- fused with the Federal Deposit Insurance salary and typically charge lower commissions mentation describing the investment options/ Corporation (FDIC). (To read more, please than their full-service counterparts. Full-service services offered by the firm, it’s specific rec- visit www.sipc.org.) brokers receive commissions based on the ommendations over the past year, and com- • Before you deal with any broker’s office, number and size of transactions in your mission rates. (Active investors may be able consider contacting the Securities Division account. Generally, only full-service brokers to negotiate lower-than-standard rates.) of the NC Department of the Secretary of