Bureau of Securities - Most Frequently Asked Questions

consumerbrief

800-242-5846

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New Jersey Division of Consumer Affairs

www.NJConsumerAffairs.gov

Bureau of Securities

Most Frequently Asked Questions

How do I resolve a dispute with my securities agent

or investment adviser?

First, attempt to resolve the problem by speaking directly

with your agent or investment adviser; and then with the

branch office manager. If you are not satisfied with their

response, contact the legal and compliance department

at the firm's headquarters. Keep written notes of

conversations and copies of all correspondence. If you

cannot resolve the problem within a reasonable period of

time, you may wish to speak with an attorney about

pursuing arbitration or other legal action, and you should

also file a complaint with the New Jersey Bureau of

Securities, the Securities and Exchange Commission

(S.E.C.) and the National Association of Securities Deal-

ers, (N.A.S.D.).

What is the difference between a financial

planner, an investment adviser and a securities

agent (or “broker”) ?

Anyone can call themselves a financial planner. If a

financial planner or a firm that does financial planning

provides specific investment recommendations

concerning securities for a fee, they must register as an

investment adviser under New Jersey law, or prove that

they are exempt from registration. Investment advisers may

be paid a flat fee or a percentage of the value of your

account, or they may earn a commission on your

investment transactions. A securities agent buys and sells

securities for a broker/dealer, commonly known as a

brokerage firm. Agents earn a commission on the

securities transactions that they recommend and execute

for your account.

How can I check on the reputation of a securities

agent or a financial adviser?

Weigh the qualifications of a financial professional the same

way you would a doctor, lawyer or accountant. Look for

several years of experience, combined with a stable record of

employment, appropriate educational credentials and solid

references from people you know and trust.

Once you narrow your search, call the New Jersey Bureau of

Securities at 973-504-3600 to obtain an information request

form. Complete the form and return it to the Bureau of

Securities. A Central Registration Depository (C.R.D.)

report, which gives details of the securities agent's

registration status, employment history, education and any

disciplinary action taken for violation of securities laws will

be sent to you. For investment advisers, disciplinary history

is reported on Part I of Form ADV, a document filed with

the S.E.C. If your investment adviser will not show you Part

I, request a copy from the S.E.C.

What is the difference between a full-service and a

discount brokerage firm?

A full-service firm customarily offers a wide range of

investments, provides research materials and makes specific

recommendations through its agents. First-time investors and

those without the time or inclination to do their own

research often choose this type of brokerage firm.

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Continued

Discount brokerage firms provide limited services while

offering discounted commission rates. More experienced

investors and frequent traders who make their own investment

decisions might prefer to deal with a discount brokerage firm.

While discount firms do not usually furnish advice or research,

the differences between full-service and discount firms have

blurred within the last few years.

My securities agent of many years has left the firm

and another agent has called to say he or she is

taking over his accounts. Is this normal practice?

While one or more agents typically "take over" the clients

of a departing agent, you should not assume that the new

person knows your financial situation well enough to begin

doing business with you. The "know your customer rule,"

a rule governing all registered representatives of brokerage

firms, requires that the agent make suitable

recommendations in light of your other holdings and your

financial situation and needs. Arrange a personal meeting

with the new agent and ask him or her to update your "new

account form" and provide you with a copy. This form

requires that the agent ask questions about your assets,

investment experience and tolerance for risk. This form is

often the most valuable document used when pursuing an

arbitration or other legal action. If you are not satisfied with

the agent assigned to you, ask the branch manager to make

a switch, and be specific about your preferences.

I'm not happy with my securities agent. How can I

transfer my account without having to deal with

this individual directly?

If an unresolved dispute is the cause of your

dissatisfaction, or if you suspect fraud, report the

problem immediately to the branch office manager and

follow the steps outlined in the first question addressed in

this Consumer Brief. If the problem is simply one of "bad

chemistry," you may ask the branch manager to reassign your

account to another agent. If you wish to change brokerage

firms entirely, the new firm can handle the transfer for you

through a system called "A.C.A.T." — Automatic Customer

Account Transfer. Generally speaking, you do not need to

have any personal contact with your old agent in order to

transfer your account(s) through the A.C.A.T. system.

I have an old stock certificate, and I do not

recognize the name of the company. How do I find

out if it has any value?

If you currently do business with a certified public

accountant or brokerage firm, ask if they will trace the

company name and quote the market price for you on a

complimentary basis. Otherwise, call or write to the

office of the Secretary of State in the state of

incorporation to ask whether the company is still in

business, or is doing business under a different name

(expect to pay a fee). For companies incorporated in New

Jersey, write to: 820 Bear Tavern Road, Trenton NJ 08625-

0308. Visit a public library with a large business reference

section to consult the Robert D. Fisher Manual of

Valuable & Worthless Securities, the Wall Street Journal

on microfiche, and other useful reference materials.

I am handling the estate of a deceased relative. How

do I transfer ownership of the securities from the

name of the deceased to the person inheriting the

securities?

If you currently do business with a brokerage firm, ask if

they will handle the transfer for you. Otherwise, call the

company's shareholder relations department for the name

and telephone number of the company's transfer agent.

The transfer agent can provide specific information about

the documents required for legal transfer.

No-load, back-end load. . . how do I select the

mutual fund fee structure that is right for me?

Start by reading the mutual fund prospectus thoroughly.

Make a list of all items described as fees, charges or

expenses. These include front-end loads, back-end charges

(or contingent deferred sales charges), redemption fees,

exchange fees, management fees, 12b-1 fees and a category

called "other expenses." Then, visit your public library to

consult a mutual fund rating reference such as Morningstar,

which publishes cost averages for the various fund

categories. If your fund's fees exceed the average, ask your

agent or mutual fund company representative to explain.

Ponzi and pyramid schemes are in the news. What

are they and how can I protect myself?

Pyramid schemes depend on the recruitment of new

participants — the base of the pyramid — in order to

deliver a promised return to those who invested first –the

top of the pyramid. It doesn't take long for the scheme to

run out of fresh recruits, who are needed to keep up the

appearance of profit generation. The pyramid collapses,

leaving all but the original "insiders" defrauded.

A Ponzi scheme is a type of pyramid that uses money from new

investors to pay interest and principal to earlier investors, until the

scheme collapses. Warning signs of Ponzi schemes include

promises of very large returns within a short period of time.

If you would like to check the registration of any individual or

firm offering securities, or if you have a question or

complaint, you may contact the Bureau of Securities by

writing, calling or by going online.

153 Halsey Street, P.O. Box 47029, Newark, NJ 07101

973-504-3600

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