Finance

Before Investing In Crypto (Or Anything, Really) Run Your Adviser’s Name Through This SEC Website

Don’t try to tell me you don’t have the time for this or are too bad with technology to figure it out.

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600px-US-SecuritiesAndExchangeCommission-Seal.svgDespite having written fairly extensively about cryptocurrency for years now, I still haven’t heard a very good argument about what the damn stuff is actually for.

Probably the best use case that’s been described to me (other than as a medium of exchange for black market transactions) is that it’s digital gold. This sort of makes sense in that the value of cryptocurrency is derived at least in part from its scarcity.

Yet, unlike crypto, as a store of value gold has the benefit of millennia of history behind it, as well as quite a few proven utilitarian applications. Plus, gold is generally harder to steal than cryptocurrency in that any would-be thief must be physically located wherever the gold is.

I wouldn’t wholeheartedly recommend either gold or cryptocurrency as an investment. That being said, if you really like heavy metals and/or enjoy gambling in hyper-speculative markets, you’re an adult, have fun. But at least do the bare minimum in checking up on your human point of contact before you make any sort of investment.

The U.S. Securities and Exchange Commission runs a website where you can check out your investment professional. You can search for individuals or firms and find out whether they are licensed with the SEC, with one or more states, and/or with the Financial Industry Regulatory Authority.

Now, not all financial professionals have to register with the SEC or the states. But even exempt investment advisers may nonetheless be required to fill out certain disclosures about their business operations in what’s known as Form ADV; this information will appear in a search. You will also get information about past registrations with state securities regulators, criminal convictions, regulatory events, and involvement as a defendant in civil litigation.

It takes what, moments to click one of the links in the preceding paragraphs and then simply type in the name of the person asking you to hand over thousands of dollars to them? Don’t try to tell me you don’t have the time for this or are too bad with technology to figure it out.

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Obviously, if a ton of scary sounding things come up when you run someone through the SEC’s website, you probably should not trust this person with your money. If nothing comes up at all about a person who is encouraging you to invest money with them, that likely signals a problem too.

“Unlicensed, unregistered persons commit much of the investment fraud in the United States,” according to the SEC. Well, let’s just go ahead and put that to the test.

The SEC recently charged Richard Heart, also known as Richard Schueler, with conducting unregistered offerings of cryptocurrency asset securities to raise more than $1 billion in crypto assets from investors. The SEC alleges that Mr. Heart misappropriated millions from his investors to purchase sports cars, luxury watches, and, of course, a 555-carat black diamond called “The Enigma.” Let’s see, nope, no “Richard Heart,” no “Richard Schueler” coming up in the SEC’s Investor.gov search tool. Bet the alleged victims wish they’d have taken 10 seconds to do that.

This system is not a silver bullet. Licensed and registered investment advisers occasionally engage in wrongdoing, too, and there seems to be a flaw in the system in that pending civil penalties do not immediately appear on an investment adviser’s report. Still, almost everyone who invests and needs someone else’s help doing it is going to be better off using a licensed, registered investment adviser, and almost everyone who uses a licensed, registered investment adviser is going to be better off knowing a bit more about that person’s background before turning over any funds.

If you’re reading this, you’re probably already in a demographic that is somewhat immunized against investment scams. But many retail investors don’t even know there’s a website where you can look someone up to see whether or not they’re a legit investment adviser. Maybe pass along the info to grandma or gramps before the next purported investment savant starts passing around the hat at church. 

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It’s quick, it’s easy, you’re out nothing by using this system. And hey, you might save yourself a lot of trouble.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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