The Alberta Securities Commission (ASC) is warning Albertans about possible illegal investment schemes in the province promoted through affiliations with religious and community groups. This is sometimes referred to as a Prime Bank Instrument.
“Investors need to be wary of any investment opportunity promising a guaranteed rate of return that is ‘too good to be true’,” cautions Lorinda Brinton, ASC Investor Education Adviser. “Any time an investment offers a rate of return substantially higher than long term GICs, term deposits, or the prime rate, it is cause for scepticism and further investigation.”
What is a Prime Bank Instrument?
Investors may be asked to contribute funds to markets available only to the largest banks and wealthiest families. Words such as Prime Bank notes, Treasury Bills, Certificates of Deposits, Letters of Credit, or Bills of Exchange are used to add legitimacy to the scheme. Investors may also receive impressive documents, such as offering memoranda, disclosure statements or promissory notes. Although these documents may look real, they can be easily forged using computer software.
What to Watch Out For
Prime Bank Instrument fraud could include any of the following:
- A promise of no-risk and high rates of returns
- A request for secrecy
- Sending money out of country
- A quick turn-around on returns
In some cases, friends or family may promote an illegal investment opportunity. They might have received a high return on their money and are looking for more investors because of a possible finder’s fee incentive. In reality, the return they earned is likely a portion of the money they originally invested or money from other investors. A fraudulent company will use its first investors as an example and incentive to bring in more investors. Eventually, the returns stop and the company disappears with the investors’ money.
How to Prevent Becoming a Victim
- Contact the ASC to verify whether the seller is registered to sell investments
- Never invest in something you don’t understand
- Always ask for documentation on any investment and read it carefully before investing
- Ask questions and obtain a second opinion from a reliable third party
Click here to learn more about how to conduct a background check.