Michael Hogan, CEO of FOLIO Investments Inc., helps answer this important question.  By the way, FOLIO is the custodian and clearing broker for NorthStar Capital Advisors.

Michael’s key observations:

  1. When fraud is involved, it is generally with introducing brokers who are able to cash your checks, and create a set of fake books.
  2. It is nearly impossible for clearing brokers to commit fraud.
  3.  “The main way the system breaks down is when you deal with an introducing broker, and you’re told to deposit money with their firm. They steal it and circumvent the system and create statements with a color printer. You’re disconnected from reality and don’t have a cross-check.”

Michael’s main recomendations:

  1. Only make out your check to its clearing broker, not the introducing broker
  2. Get access to the clearing broker’s website so you can see your account.
  3. Check your balances frequently.

Learn more in this article:

Is Your Money Actually Safe With Your Broker?

Is Your Money Actually Safe With Your Broker?http://www.businessinsider.com/is-your-money-safe-with-your-broker-2011-5When Lehman Brothers went bankrupt in September 2008, most investors faced a question they had never considered: Is my money safe with my broker?