Fraud prevention?

Discussion in 'Retail Brokers' started by drukes1234, Jun 12, 2008.

  1. I recently had my credit card used at various places online without my authorization and it was an ordeal but I got my money back. My question is this: What happens if someone breaks into your brokerage account and start buying a bunch of penny stocks or something. What is the protection for us investors, specifically at Interactive Brokers?

    It's happened at Etrade before......
  2. FORGET IT. Our beloved legislators passed some weak legislation designed to protect Wallstreet, not YOU. In reality, the real "fraud" is that the SIPC is so weak.
    After years of complaints, efforts by attorneys representing investors and pressure by some consumer-friendly legislators, the National Association of Securities Dealers, Inc. (NASD) and the Securities Exchange Commission (SEC) were finally persuaded to act. However, rather than force brokerage firms to disclose the insurance coverage (or lack of it) the NASD and SEC passed a much less effective requirement.

    The new rule requires members to merely advise new customers, and remind existing customers annually, that they can obtain information about the Securities Investor Protection Corporation by contacting SIPC. The phone number and Web address will be included.

    As is true with most insurance companies it is very difficult to determine from the information provided by SIPC what is and is not covered by this protection. Therefore, the vast majority of investors will remain in the dark and continue to be misled into believing they can recover if they are defrauded by a broker or firm in an insured account.

    Once again the SEC is serving Wall Street firms rather than protecting investors. These firms do not want securities fraud to be covered by SIPC because their premiums would be much higher. Meanwhile, these firms have the best of both worlds: The can continue to “sell” investors into a false sense of security by indicating their accounts are “insured”, yet pay low premiums because the insurance covers little and rarely pays any claims.

    Additional propaganda can be found in SR-NASD-2006-124 (Release No. 34-55737, 5/10/07 and at; 72 Fed. Reg. 27606, 5/16/07).
  3. Some brokers say they will reimburse you for any losses caused by fraudulent usage of your account. Sometimes there are stipulations, such as requiring you to report any problems you notice in a timely manner.

    I've seen one message thread here in which the broker reimbursed the customer but then closed his account permanently.

    If a broker does have a "no fraud" policy, it's generally trumpeted prominently on their home page.