| BEFORE
YOU INVEST Before
you invest, consider your complete financial situation,
looking at both your current and future needs. In
general, investors should avoid higher-risk investments
unless they have a steady income, adequate insurance, and
readily accessible cash reserves in case of a loss, and
most important, are willing to accept risk to their
principal.
Some Important Considerations:
- When you choose to invest your
money, the final decisions are yours alone. The
risk of the investment is also yours.
- Risk and return go hand in hand.
Higher returns mean greater risk, while lower
returns provide greater safety.
- Be very suspicious of any claims
that an investment will pay high returns without
high risk.
- If anyone guarantees your
investment against loss, you should immediately
contact the New Hampshire Bureau of Securities
Regulation..
- Never succumb to high-pressure
sales tactics. Be suspicious of anyone whose main
goal seems to be getting you to turn over your
money before you have fully evaluated the
investment.
- If any investment sounds too good
to be true, it probably is.
- Don't invest in anything you don't
fully understand.
- Always set aside some of your
money for emergencies before you invest.
- Consider getting advice from a
trained and licensed professional.
- Be selective in your investment
choices. Exercise your right to say
"No."
- Develop a sensible investment plan
and follow it.
- Judge each company on its own
merits. Don't invest in a company just because it
is part of a fast-growing or successful industry.
- Never invest solely on the basis
of information obtained from an unsolicited
telephone call.
- Beware of buying investments over
the phone or the Internet from strangers.
- Check the credentials of anyone
who offers to sell you an investment. Before you
invest, you should always investigate the
brokerage company making the recommendation, the
salesperson, and the investment product itself by
asking questions and checking references. The
best place to start in protecting yourself
against becoming a victim of fraud is to
carefully select your brokerage firm and
salesperson.
- Before you invest, make sure your
brokers, investment advisers, and
investment adviser representatives are licensed
to sell securities.
Always check and see if they or their firms have
had run-ins with
regulators or other investors.
- Call the New Hampshire Bureau
of Securities Regulation at
- (603) 271-1463 for information
on any of the following:
- Licensing status and disciplinary
history of broker-dealer firms;
- Licensing status and disciplinary
history of sales representatives;
- Licensing status and disciplinary
history of investment advisers and their
representatives; and
- Registration of the investments
(securities) involved.
OR visit the NASD
Regulation Public Disclosure Program.
You should also thoroughly understand
the investment, including the risks involved, before you
invest. Contact the appropriate regulatory agencies.
Visit your local bookstore or library and educate
yourself on appropriate investment subjects that interest
you. Be informed and certain of what you are buying
before you invest.
Protect yourself against fraud (See also How to
Spot a Scam)
When you are contacted by phone or in person to make an
investment, you should ask the following questions and
write down the responses:
- What is the name of the caller,
the firm's name, and their phone number?
- How did you get my name?
- Where is your office located?
- How long has your company been in
business?
- Are you and your firm licensed
with the New Hampshire Bureau of Securities
Regulation to sell this investment?
- Is the investment registered with
the New Hampshire Bureau of Securities
Regulation?
- What are the risks of this
investment?
- Can you send me an offering
document or prospectus that explains the details
of this investment?
- How do I liquidate this
investment, and how long will it take?
- Would you explain this investment
to a third party, such as my attorney,
accountant, investment adviser, or banker?
- Can you tell me the name of your
firm's principals and officers?
- Can you provide references?
- Are these investments traded on a
regulated exchange? If so, which one?
- What governmental or industry
regulatory supervision is your firm subject to?
- How much of my money would go to
commissions, management fees, and the like (now
and in the future)?
- If disputes should arise, how will
they be resolved?
Asking these questions is the beginning
of the investigatory process. But remember, a skillful
presenter will have answers to all of your questions. It
is your responsibility to verify the information you
receive in response to the questions asked above. You can
determine if some of the information you have been given
is accurate by calling the relevant numbers and firms
listed.
Remember:
All investments carry a risk, even if all of the above
steps indicate that the company, salesperson, and
securities you want to invest in are solid and
legitimate. However, not all risk is the same. Generally,
the higher the return you want on your investment, the
greater risk you are taking.
No amount of investigation will change these basic rules.
Don't invest more than you are willing to lose.
Setting Your Investment Goals
Ask yourself, "What do I want to accomplish through
my investments?" For most investors, the following
investment goals or objectives, or some combination of
these, provide an initial answer to that question:
Safety
This objective reflects a conservative
investment philosophy with minimal risk of loss of the
original investment (the "principal"). Income
An "income" objective is achieved by purchasing
investments that provide a stream of income through
regular payments, which may or may not decrease the
invested principal.
Growth
This category refers to investing for
long-term growth or appreciation in market value. Growth
investments carry a higher risk than either safety- or
income-oriented investments. Growth investments generally
provide little or no dividend income.
Speculation
Speculative investments carry a higher
than average possibility of loss. This strategy often
includes short-term trading of new or unproven companies'
stocks or options. Although there is the possibility of
higher and faster rewards, speculative investments also
are high risk, meaning there also is the possibility of
larger and faster losses of some or all of your
principal.
Balancing "risk" and "return" to meet
your goals
As an investor, you choose your investment goals with an
emphasis on one or more of the above categories. You may
also wish to allocate portions of your investment
portfolio to more accurately express your investment
goals.
Of course, setting a goal and reaching it are two very
different things. You may need professional assistance to
realize your investment goals and to achieve your
financial objectives.
If you choose to work with a broker, communicate your
investment goals and financial objectives clearly. Put
them in writing, and keep a copy for your own records.
Remember, the more money you want to make from your
investment, the more risk you must be willing to take.
Risk means that you may lose all or part of your
principal. If a high level of risk makes you
uncomfortable, select your investments accordingly.
Suitability
The basic concept in securities law regarding whether a
recommended investment is appropriate for a particular
investor is known as "suitability." Any
investment professional should be able to articulate why
an investment recommendation is suitable for your needs.
Do not be afraid to ask many questions, no matter how
basic they may seem to you.
There are many sources of information about any company
in which you may be contemplating making an investment.
If you don't know where to look, start by contacting the
New Hampshire Bureau of Securities Regulation. Securities
must be registered or exempt from registration in each
state where they are sold. Information about the company
may be available to the public. You should also ask your
brokerage firm or investment adviser to assist you in
gathering information about the company in which you may
invest.
Most companies whose stock is traded "over the
counter" or on a stock exchange are required to file
"full disclosure" reports on a regular basis
with the Securities and Exchange Commission (SEC). These
comprehensive reports are available for a modest copying
charge by writing to:
Public Reference Room, Mail Stop 1-2
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-1002
Pay attention to business and financial
newspapers in your area. Often, these periodicals provide
in-depth coverage about a specific company or segment of
the industry. Check with your local reference librarian
for assistance in identifying appropriate
investment-related materials.
One of the very best ways for an investor to protect
himself or herself is through adequate information,
education, and consultation of available resources.
AFTER YOU INVEST
Your investment responsibilities don't
end once you've selected a broker and an investment.
Some of the more important responsibilities are:
- Keeping your securities in a safe
place;
- Maintaining your records; and
- Monitoring your investment
account.
If something goes wrong, it's important
to recognize the problem quickly and take appropriate
action.
How to Keep Your Securities Safe
When you purchase shares of stock or a bond, you may
receive a certificate representing your ownership. These
valuable documents should be kept in a safe place. It is
costly and time-consuming to replace a certificate if the
original is lost or destroyed.
If you purchase stock through a brokerage firm, you
usually have three choices regarding how your stock
certificates are handled:
A certificate showing the number of shares purchased may
be made out in your name, and delivered to you. When you
sell the stock, you must in turn endorse the certificate
and deliver it to your broker. The stock certificate may
be held in your name at the brokerage firm. Although the
certificate must still be endorsed when you sell, this
option eliminates storage concerns.
A very common practice is for your
broker to hold the stock certificate in "street
name." The brokerage firm will be listed as the
shareholder of record, even though you are the actual
owner. The broker must forward to you any mailings by the
corporation, such as annual reports and proxy materials.
This may cause some delay. However, the transfer process
is much simpler when you sell the stock. If you elect to
have your securities held in street name, you can request
that dividends or interest payments be forwarded to you.
Be sure to discuss these options with
your broker and decide which is right for you. Ask
whether the broker charges additional fees for holding
stock in the street name, and ask about any related
custodial fees.
Monitoring Your Account
After you've invested, you should receive periodic
account statements. You will also receive confirmations
for each trade as it occurs. Don't throw them away. Read
each confirmation and account statement, and make sure
that they accurately reflect the trading activity that
you have authorized in your account. Check to see how
much of a commission you were charged. You should expect
to be informed in advance of any increases in charges,
such as commissions and custodial fees.
As you monitor your confirmations and account statements,
follow up immediately on anything that you do not
understand. Investors who fail to do so are sometimes
said to have "ratified" transactions that
otherwise might not have been appropriate or authorized.
This can make pursuing your legal options that much more
difficult. If you do not receive prompt assistance from
the broker-dealer, contact the Bureau of Securities
Regulation.
Designate a file folder for storing all
investment-related information. As soon as you've
received and reviewed the confirmation slips and monthly
statements from your broker, file them. If you have a
dispute with your broker regarding your investment, this
file may be invaluable.
What to Expect From Your Broker
When you fill out your new account form, you provide the
broker with information about your financial situation,
your investment objectives, and the level of risk you are
willing to take.
You have a right to expect your broker to follow your
instructions and to recommend appropriate investments. As
noted above, securities regulators use the term
"suitability" to refer to the question of
whether a broker's investment recommendations are
appropriate for a given investor.
Although you are not protected from a decline in the
value of securities due to normal market risks, you may
have certain legal rights if a broker's recommendations
were unsuitable based on your financial objectives and
situation.
Commissions and Churning
A broker's earnings are based on sales commissions or
markups. The more buying and selling a broker does for
each customer, the higher his or her income. Unnecessary
buying and selling is called churning. If you suspect
that certain recommendations have been unsuitable or that
your account is being churned, immediately contact the
Bureau of Securities Regulation.
If You Have Problems
Regardless of how careful you are in selecting a broker,
problems may still occur. Contact your broker at the
first sign of trouble and clearly communicate your
concerns. Ask your broker for a written reply explaining
the handling of your particular problem. You also should
file a written report of your problem with the home
office of the broker's firm. Call the Bureau of
Securities Regulation for the appropriate contact person
and address.
If you aren't satisfied with the result, or if this
process takes more than 7 to 10 days to complete, contact
the Bureau of Securities Regulation. Although your
initial contact may be over the phone, we may ask you to
document your complaint in writing. You should be
prepared to list specific details of your investment,
including dates, amounts, and types of securities. Often,
copies of your account statements or other documents
attached to your complaint will help to explain the
situation.
Always keep a copy of any complaint letters you send and
the responses you receive. These documents may be of
great benefit to you later.
You may also need to consider consulting a private
attorney for assistance in resolving a securities
dispute. While regulators will investigate for violations
of securities laws and rules, regulatory agencies cannot
directly represent investors. In some instances, the only
way to recover your investment may be through a private
lawsuit or arbitration proceeding
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