As the COVID-19 pandemic continues to impact our finances, it is crucial now, more than ever, for Canadians to learn how to protect their money. It is especially important for Canadian investors to recognize the signs of investment fraud and know what to do if you’ve become a victim.
In honor of this year’s Fraud Prevention Month, our team put together a guide on how to recognize and protect yourself from investment fraud.
What is Investment Fraud?
Investment fraud refers to the illegal activity of providing someone with false information to persuade them into investing in something. Those who fall victim of investment fraud are usually investing in a product or business that does not exist. Investment scammers are increasingly targeting Canadians during the COVID-19 pandemic due to the high levels of vulnerability and uncertainty we all face. It is also important to note that anyone can become a victim of investment fraud.
Signs of Investment Fraud
Guaranteed high returns with little to no risk
With most investments, such as stocks, there are no guarantees that you will make money. Generally, higher investment returns offer higher risks, and lower returns offer lower risks. If an investment opportunity promises you high returns with little to no risk, it is likely a scam; this return-risk relationship cannot be guaranteed–nor is it likely.
High-pressure sales tactics
Investment scammers typically use phrases like, “limited time offer!” or “act now before it’s too late!” to persuade their victims. These high-pressure sales tactics are meant to convince investors to make decisions quickly so they don’t have enough time to research the investment opportunity and realize it’s fraudulent. Legitimate investment opportunities will provide you with adequate time to review the opportunity to make an informed decision based on your needs.
Offering inside information
If an investment opportunity is “exclusive,” it is likely a scam. Investment scammers typically claim to have confidential or inside information about the company to make their victims feel like they have private access to the investment. However, legitimate investments are required to file public information. Trading on inside information is also illegal in Canada.
Any investment company, as well as the person selling the investment, must be registered under their provincial securities regulator. If you are asked to make funds payable to an unregistered individual or company, it is likely a scam.
Protecting Yourself from Investment Fraud
Watch for all the signs
It is important for investors to be able to immediately recognize all the signs listed above. If you are unsure about any of the information you received from the investment opportunity, make sure you ask questions and get direct answers.
Check the registration before you invest
As mentioned, legitimate investment opportunities must be registered under their provincial securities regulator. You can check the registration of an individual or investment firm using the Canadian Securities Admistratrator’s (CSA) National Registration Search. Make sure to check the registration before you make any investment decisions.
Seek advice from a professional
If you are offered an investment opportunity that you are unsure about, make sure you seek the advice of a financial adviser. Our portfolio managers at The RaeLipskie Partnership can help with any concerns you may have regarding investment fraud.
If you fear that you have become a victim of investment fraud, please don’t hesitate to reach out and speak to one of our portfolio managers. If you have any general questions about investment fraud or our investment services, contact us today.