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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

The Thirteen Dirty Secrets That A Fraudster Does Not Want You To Know?

Posted in Compliance and Supervision, Corporate Governance, Dodd-Frank, Registered Representatives

The late great comedian, George Carlin, was made famous by his routine, “The Seven Dirty Words You Can Never Say On Televisions”.  Likewise, fraudsters do not want compliance personnel to ever mention the 13 common dirty traits that may uncover a fraud.

Although not as funny as George Carlin, focusing on these traits may be the key to a firm’s survival.  In no order of significance, you should look for people who do the following:

1.         Never takes a vacation;

2.         Live beyond their means;

3.         Too much debt relative to income (creditors calling the place of employment);

4.         Possess an attitude that they are above the system;

5.         Suspicious of having others check their work;

6.         Extreme behavior changes to either extreme (depression and euphoria);

7.         Set unrealistic personal goals;

8.         Unexplained spike in production;

9.         Spouse loses a job;

10.       Divorce (i.e., a property distribution);

11.       Drug or alcohol abuse;

12.       High number of elderly clients (or any other affinity group concentration); and

13.       Consistently offering new product lines for investing.

So what does the list of 13 suspect behaviors mean for member firms and investment advisers?  You must do all you can to know your personnel as well as you need to know your customers before making an investment recommendation.fraud.jpg

The better you know your team, the better prepared you will be to notice any of these ugly traits.  You will notice erratic behavior or behavior that is simply out of the norm.

Certainly everyone going through a divorce or an alcohol problem are not fraudsters, but traits in combination may be the sign of trouble.  Do more due diligence over your personnel when any of these traits arise.

Protect yourself and the firm.  There are fraudsters under every rock.  You just need to identify those rocks needing to be turned over. 

 

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