The Internet has become an inexpensive and easy way for individuals and businesses to raise money for their activities. Congress recently passed the JOBS Act, which directs the Securities and Exchange Commission (SEC) to create rules exempting crowdfunding from the securities registration laws. Once implemented, these rules will remove restrictions on start-up companies seeking investors over the Internet. Investors should be on the lookout for unscrupulous issuers and intermediaries who may attempt to engage in crowdfunding before the rules are written or misuse crowdfunding to steal from investors through false and misleading representations.
Be honest when filling out a new account form. Your broker or representative cannot recommend investments to you unless he or she understands your complete financial picture and the level of risk you are willing to accept.
Do not sign the form until it is completed, the information is accurate and you understand and are willing to accept the terms and conditions it imposes upon you. Take your time. Ask questions and read the fine print.
As an investor, you should shop for a brokerage firm just as you would for any other professional service. Brokerage firms come in all sizes, from "one-man" firms to international corporations. Similarly, the services offered by each firm and the commissions they charge vary significantly.
Brokerage firms may be classified into three basic types: full-service, discount and limited products.
Both legitimate brokers and con artists offer many investment opportunities. A legitimate investment can offer excellent returns, while a deal with a con artist is guaranteed to result in financial loss. Con artists typically use the following techniques: