An unregistered broker-dealer is someone who sells stocks or other assets, such as Forex, without being registered with and governed by local securities authorities. As these unlicensed broker-dealers are not subject to many of the laws and regulations that protect investors from fraud, there are many scammers who operate as unregistered brokers.
Is an Unregistered Broker-Dealer Always a Scam?
There are some legitimate broker-dealers who provide unregistered offerings as a way to raise private funds from investors. These unregistered offerings are also known as private placements.
However, these types of legit unregistered brokers are highly unlikely to contact the average investor. If an unregistered broker-dealer reaches out to you unsolicited and offers you some type of investment opportunity, it is HIGHLY likely to be a scam.
To sum up, not all unregistered brokers are scammers, but many scammers pose as unregistered brokers. As an individual investor, you should never purchase stocks, Forex, cryptocurrency, binary options, or any other investment assets through an unregistered broker.
Fraudsters frequently pose as unregistered stock brokers, investment advisors, investment bankers, and other financial professionals to gain your trust and defraud you of your funds.
What Are the Red Flags Linked with Unregistered Brokers?
They May Claim High Return on Investment with No Risk
Most unlicensed broker-dealer scammers have this in common, no matter what type of investment scam they are running: they claim that they can guarantee you extremely high returns in a short amount of time, with no risk of failure.
The fact of the matter is that there is no such thing as a risk-free investment. Even the most stable stocks can experience sudden drops, and no real financial professional will tell you otherwise.
Because of this, always be skeptical of anyone who is claiming that they can make you large sums of money, guaranteed and risk free. If you send such an individual money to “invest,” chances are they will just disappear and you’ll never get a dime back. Or, they might send you some small returns to start with to try and trick you into investing even more, before disappearing forever.
They May Use Strong and/or Aggressive Sales Tactics
Scammers typically rely on pressuring their victims into making bad investments without taking the time to really think about them. They claim to have “once-in-a-lifetime” opportunities, or say things like “everyone is buying it,” in order to make you feel like you can’t miss out on an investment offer.
How do these unregistered scam brokers contact you, you ask? Well, it’s becoming more and more common that they post sponsored ads on Instagram and other social media networks to reel their prey in. They may also reach out to you via cold calling, emailing, or messaging.
The bottom line is that registered, legitimate brokers don’t need to use these types of high-pressure sales tactics to get clients. So, if someone reaches out to you out of the blue and starts aggressively trying to sell you some investment opportunity, cease contact with them and block them immediately.
They May Not Be Properly Licensed
This goes without saying: if a broker is unregistered, they don’t have the proper licenses to legally sell you investments in your area.
Most investment scammers operate offshores and use complex tech networks to evade authorities. They also target victims in many different countries, so there’s no way they could have the proper licensing to operate in so many different places.
To avoid getting scammed by an unregistered broker-dealer, always work with a licensed and registered broker in your area, and preferably with one who has a physical office you can go into at any time.
They May Not Ask You About Your Net Worth or Income
Real investment professionals should always ask you about your net worth and income in order to get an idea of what types of investments would work best for you.
Scammers don’t care how much you have or how much you make — they’ll take whatever they can get off of you.
So, if a broker is ever trying to sell you something without discussing your personal financial situation, it’s another red flag that’s often associated with unlicensed brokers.
They May Avoid Putting Everything in Writing
Naturally, scammers want to leave as little evidence as possible. So, unregistered brokers who are operating scams usually avoid putting anything legal into writing. They may do this by sending you messages via Telegram, WhatsApp, or other encrypted messaging services, or by trying to make deals verbally over the phone or from a burner (fake) email address.
Alternatively, some scammers might try to make offers seem legitimate by providing fake contracts. These are often full of spelling mistakes, grammatical errors, and other problems that make them illegitimate. If you see these types of mistakes in communications or contracts, they are also red flags of a scam.
They May Offer Unsolicited Investment Offers
Unregistered scam brokers almost always contact you without you soliciting any information from you. As we’ve touched on already, this might be through telemarketing, email marketing, social media, or messaging apps.
Be extremely wary of any unsolicited investment offers you receive. Real, registered broker-dealers rely on word of mouth, references, and reputation to gain the majority of their clients, so they have no reason to be texting or calling you to try and get your business.
All of These Red Flags May Lead To Being Scammed
If you see any of the above red flags in connection with an unregistered broker, do not send them any money to invest. In fact, the safest option is to not work with unregistered brokers at all — there simply isn’t any need to, and the risk is too high.
As an individual investor, there are plenty of legitimate platforms and brokers you can invest through, which are registered and regulated in your country. There are legal protections in place to ensure your investments are fairly made through registered broker-dealers.
However, even if you are careful, it’s still possible to get scammed by shady brokers or financial professionals. If this happens to you, don’t worry, you may still be able to get some or all of your money back by working with one of the Top 10 Chargeback companies out there.
How a Chargeback Can Help You Recover Your Lost Funds
Chargeback companies are composed of financial professionals and cyber crime experts who are well-versed in dealing with unregistered broker scams. These fund recovery specialists will review the evidence in your case and choose the appropriate method to retrieve your stolen funds.
For example, they may be able to help you process a chargeback through your bank or credit card provider, which can reverse any fraudulent charges made to your credit or debit cards. If a chargeback isn’t viable, a chargeback company’s fund recovery experts have other tactics they can use to track down and pressure scammers into giving your money back.
If you’ve been the victim of an investment scam, don’t wait any longer to call a chargeback company. Contact one of the top reputable chargeback companies today to start reviewing your case ASAP for the best odds of a favorable outcome.