Who’S Looking Out For Individual Investors?


If you’ve been investing for a while, you know that there are few guarantees in the investment world and that you’re going to be taking some risks with your money.

Still, you’d like to know that you’re participating in a system that is fair to everyone and governed by rules. So you may ask yourself: “Who’s looking out for me?”

Fortunately, you’re not alone. In fact, a variety of government agencies and industry groups are working to protect you. Let’s take a quick look at some of them:

• SEC — The Securities and Exchange Commission was created in 1934, in the midst of the Great Depression to restore investor confidence in U.S. capital markets.

The laws that created the SEC were designed to ensure that companies selling securities must tell the public the truth about their businesses, the securities they sell and the risks involved. The SEC investigates a wide range of violations, including outright theft, price manipulation, insider trading and misrepresentation or omission of key information about securities. For a more detailed understanding of what the SEC does, go to www.sec.gov.

• FINRA — The Financial Industry Regulatory Authority was created in July 2007 through the consolidation of the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange.

FINRA registers and educates financial services professionals, writes and enforces rules, enforces federal securities laws and educates individual investors. You can learn more about FINRA by visiting its Web site at finra.org.

• NASAA — The North American Securities Administrators Association licenses brokerage firms and their agents, investigates violations of state laws, files enforcement actions and educates the public about investment fraud. To learn more, visit nasaa.org.

These agencies, and others involved in the investment world, work hard to protect your interests because the capital markets, as a whole, will always benefit when investors are confident that they are participating in an equitable system.

But despite the work of these agencies, you still need to take steps to defend yourself against unpleasant surprises down the road. Here are a few ideas to consider:

• Know your investments. Never invest in something you don’t fully understand. Before you write a check, make sure you know exactly what goes into an investment, along with its potential benefits and risks.

• Know your risk tolerance. If you’re losing sleep over the fate of your investments, you may be taking on more risk than you should. On the other hand, you may sometimes need to move outside your comfort zone to achieve your financial objectives. If you invest too conservatively, your portfolio may not provide enough growth potential to keep up with inflation, which can become a real threat to your financial security.

• Work with a financial adviser who knows your situation. An ethical, professional financial adviser who knows your needs, goals and investment preferences should recommend only investments that are appropriate for you.

Between your awareness of the various regulatory agencies and your own informed actions, you can feel confident about your ability to invest — and that’s a good feeling to have.

Scott Flake is a financial adviser with Edward Jones. He hosts a weekly investment discussion on Tuesdays at 10 a.m. at 411 S. Beeline Highway, Suite B.


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