In many important ways, an investor is not simply a consumer but a party to a legal contract. Both the offeror and purchaser of an investment have rights and responsibilities. This "Bill of Rights"is designed to assist you the investor in making an informed decision before committing your funds. It is not intended to be exhaustive in its descriptions. Should you desire further information about a particular type of investment, you are invited to contact the appropriate organization listed on the back of this brochure.
You also have the right to request information about the firm or the individuals with whom you would be doing business and whether they have a "track record." If so, you have the right to know what it has been and whether it is real or "hypothetical." If they have been in trouble with regulatory authorities, you have the right to know this. If a rate of return is advertised, you have the right to know how it is calculated and any assumptions it is based on. You also have the right to ask what financial interest the seller of the investment has in the sale.
Ask for all available literature about the investment. If there is a prospectus, obtain it and read it. This is where the bad as well as the good about the investment has to be discussed. If an investment involves a company whose stock is publicly traded, get a copy of its latest annual report. It can also be worthwhile to visit your public library to find out what may have been written about the investment in recent business or financial periodicals.
Obtaining information isn't likely to tell you whether or not a given investment will be profitable, but what you are able to find out--or unable to find out--could help you decide if it's an appropriate investment for you at that time. No investment is right for everyone.
Others may be less obvious. Many people do not fully understand, for example, that even a U.S. Treasury Bond may fluctuate in market value prior to maturity. Or that with some investments it is possible to lose more than the amount initially invested. The point is that different investments involve different kinds of risk and these risks can differ in degree. A general rule of thumb is that the greater the potential reward, the greater the potential risk.
In some areas of investment, there is a legal obligation to disclose the risks in writing. If the investment doesn't require a prospectus or written risk disclosure statement, you might nonetheless want to ask for a written explanation of the risks. The bottom line: Unless your understanding of the ways you can lose money is equal to your understanding of the ways you can make money, don't invest!
Similarly, you have the right to a full disclosure of the costs that will be or may be incurred. In addition to commissions, sales charges or "loads" when you buy and/or sell, this includes any other transaction expenses, maintenance or service charges, profit sharing arrangements, redemption fees or penalties and the like.
In the securities industry, for example, "suitability" rules require that investment advice be appropriate for the particular customer. In the commodity futures industry a "know your customer" rule requires that firms and brokers obtain sufficient information to assure that investors are adequately informed of the risks involved. Beware of someone who insists that a particular investment is "right" for you although he or she knows nothing about you.
Unfortunately, in any area of investment, there are those few less-than-ethical persons who may lose sight of their obligations, and of your rights: By making investments you have not authorized, by making an excessive number of investments for the purpose of creating additional commission income for themselves or, at the extreme, appropriating your funds for their personal use. If there is even a hint of such activities, insist on an immediate and full explanation. Unless you are completely satisfied with the answer, ask the appropriate regulatory or legal authorities to look into it. It's your right.
You should also have access to the person or firm that has your funds. Investment scam artists are well versed in ways of finding you but, particularly once they have your money in hand, they can make it difficult or impossible for you to find them.
It is wise to determine before you invest what avenues of recourse are available to you if they should be needed. One means of exercising your right of recourse may be to file suit in a court of law. Or you may be able to initiate arbitration, mediation or reparation proceedings through an exchange or a regulatory organization. Additional information about filing complaints can be obtained through various regulatory organizations.
This Investors' Bill of Rights has been prepared as a service to the investing public by
National Futures Association
200 West Madison Street
Chicago, Illinois 60606-3447
800.572.9400 (in Illinois)
in association with the following organizations:
American Association of Individual Investors
625 North Michigan Avenue
Chicago, Illinois 60611
Commodity Futures Trading Commission
2033 K Street, N.W.
Washington, D.C. 20581
Council of Better Business Bureaus
4200 Wilson Boulevard, Suite 800
Arlington, Virginia 22203
National Consumers League
815 15th Street, N.W.
Washington, D.C. 20005
North American Securities Administrators Association
555 New Jersey Avenue, N.W. Suite 750
Washington, D.C. 20001
United States Office of Consumer Affairs
1620 L Street, N.W.
Washington, D.C. 20036
United States Postal Service Chief Postal Inspector
Washington, D.C. 20260-2100
If you suspect fraud or misrepresentation, contact the Chief Postal Inspector or your local Postmaster or Postal Inspector. For any other mail service problems contact your local Postmaster, or
The Consumer Advocate
United States Postal Service
Washington, D.C. 20260-6320
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