Book Review: The Vigilant Investor

I received a free copy of the book, The Vigilant Investor: A Former SEC Enforcer Reveals How to Fraud-Proof Your Investments to review. With all the financial fraud in the news the past few years it seemed like this book could be a good resource. The author,Pat Huddleston, is a former SEC enforcer and founder of investor protection company, Investor’s Watchdog so he knows a lot about scams.

The first part of the book focuses on recognizing scam artists. It gives you resources such as the SEC’s website and PACER, which searches courthouse records that you can use to investigate a potential investment. The next part shows you how to steer clear of offering frauds and other popular scams. After that he predicts the future of fraud. Now that people know to be skeptical of investments such as the Bernie Madoff fund that always had large returns even when the market is down future scammers will change their tactics to make it harder to uncover their investment scams. Lastly he tells the truth about the securities industry. The author covers the conflict of interest that may keep a branch manager from regulating brokers who churn customers’ accounts to generate commissions, pointing out that putting the brakes on those brokers will cut into the firm’s bottom line. He reveals the signs that suggest trouble may be brewing, and urges investors to open brokerage firm mail immediately; complain in writing about unauthorized trading right away; and review monthly account statements to confirm that the firm has not changed their investment objectives.

Before reading this book I wondered how so many people could fall for scams that seemed obvious to me. The author shows that the scams aren’t as obvious as they seem. Many of the stories of the different scams are very entertaining as well as informative. Following the advice in this book could save you a lot of money if it keeps you from investing in a scam.