A. Your Broker's Responsibility to You
In most states, when a securities broker "hangs out his shingle" he undertakes a fiduciary duty to his customers. In all states, he represents that he will deal fairly and in accordance with the standards of his profession.
1. A broker has an obligation to "know his customer." He must learn your financial circumstances so that he can properly recommend securities.
2. He must account for your money. He does this through periodic statements and confirmation slips of each transaction. Read them. Get an explanation if you don't understand them. If your broker's explanation is unsatisfactory, talk to his manager.
3. No half-truths. He must not make any untrue statement of a material fact, and must not omit to state a material fact necessary to make the statements made not misleading in light of the circumstances under which they are made.
B. Your Responsibility in the Securities Transaction
1. You must act as a reasonably prudent investor. Don't check your brains at the door. Ask all the questions you want and feel comfortable that you understand what you are doing.
2. Don't misrepresent your financial circumstances and don't allow the broker to fill out anything stating a false financial history. Read and understand what you sign. Don't sign blank forms.
