Avoiding Financial Trading Scams: Choose the Right Broker

Jeremy BiberdorfBy: Jeremy Biberdorf

September 7, 2017September 7, 2017

The Importance of Avoiding Financial Trading Scams: Tips to Help You Choose the Right Broker

“Facts are threatening to those invested in fraud.” – DaShanne Stokes

Are you interested in online share trading, or investing in the global financial markets? The good news is that it is now a simple matter to open an account with an online trading broker and to start trading.

The ease with which people can access the internet has given rise to a substantial number of businesses trading online. 2016 statistics from Statista, the Statistics Portal show that the number of individuals who purchased goods online is estimated at 1.61 billion people. Furthermore, the global eCommerce sales figures added up to 1.9 trillion USD.

Choosing a reliable financial market trading partner

Unfortunately, with the increased ease of conducting business online, comes the added risk of getting caught in a scam or fraud scheme. However, as Douglas Williams, head of cyber-security at Weiss Finance notes, “this does not mean that you should shy away from opening an online share trading account. All it means is that you should be hyper vigilant when choosing an online trading broker.

Therefore, here are several tips to help you choose the right online trading brokerage firm to partner with:

KYC documentation

The Know Your Customer (KYC) business process is designed to identify and verify whether the trader is a bona fide person or a front company designed to launder money or syphon funds off to terrorist organization.

Therefore, a reputable online trading company should ask you for the following documents when you open a trading account:  Identity document, proof of residence, a copy (back and front) of the credit or debit card that you will use to deposit money into the broker’s trading account, as well as a signed deposit declaration and bonus declaration.

Once you have submitted these documents, your trading account will be verified, and you will be able trade on the different financial markets.

Not all online trading companies insist on KYC-compliance which translates into the fact that anyone can open an account with them, for both nefarious and legal reasons. Another reason why a broker might not insist KYC-compliance is that they are fraudulent and intend on scamming people out of their initial deposits. Therefore, it’s best not to trust a company that does not ask for your KYC documents.

Outrageous statements

The fact of the matter is that online share trading is a high-risk, albeit high-reward exercise. Therefore, any company that offers low-risk, high-reward financial market trading should be avoided. There is a good chance that the website owner is running a fraudulent operation.

Furthermore, a reliable online trading company will publish a warning on their website that even though online share trading can yield high, it is also a high-risk venture where the trader can lose his initial investment. This statement is also compounded the current global financial market volatility and instability.

Therefore, it is worth avoiding a broker that does not warn traders and potential traders of the risks involved with online trading. The risk of the operation being fraudulent or a scam is too high to take a chance.


Esmeralda Cruz from ScoreNewYorkCity.org makes the valid point that “a business without a website is a brand without a face.” In a similar vein, a shoddy website is just as bad as not having a website at all. In fact, it is probably worse than having no website.

The aim of an online trading website is to ensure that the online trader has a positive user-experience when placing trades. Therefore, it’s important that the website content makes sense and is simple to understand.  The site needs to be easy to navigate around, and it should have a professional look and feel.

This point in itself is not a reason to assume that an investment broker is fraudulent. However, if the broker’s website is poorly designed and constructed, it shows that the company does not pay attention to detail and its focus is not on providing a superior customer experience. Therefore, it’s worth staying away from this broker.

Final thoughts

There is no doubt that conducting an intense investigation into each online trading broker is going to take time. It might even be time that you do not have to spend. However, the result is well-worth the time spent determining which is the best broker to partner with. If nothing else, it will save the heartache of losing your initial investment!

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

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