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You ASC'd Blog

We’ve created this blog to present you with answers to some of the more common questions we receive from investors. We'll have different subject matter experts blogging about what they know best and we'll update it as new blog topics arise. We hope you'll find it interesting and helpful.

 

February 13
Don’t get financially “catfished” by online investment fraudsters

In the Valentine’s Day edition of our blog, we apply the term “catfishing” to online investment fraud. An expression typically used in the online dating world,“catfishing” is the act of creating a false online identity for deceptive purposes. In online dating, individuals who catfish create false profiles and lie about their personal life to meet people and build romantic relationships. While online investment fraudsters may not be lying about their appearance or personal profile, they will falsify information about their company’s location, legitimacy and expertise in order to gain your trust and money.

For example, what if you found out that Bob, who you met on a stock message board, is really a scam artist? The same Bob who:

  • claimed he was an experienced financial adviser located in Alberta and pitched you a “once in a lifetime, low-risk, high-return, investment opportunity too good to pass up”
  • guaranteed you early retirement when you confided in him about your worries for your financial future
  • you gave your personal financial information to so he could triple your initial investment

If we told you that Bob is in fact located somewhere overseas, not registered to sell securities and it is his job to try and swindle you out of your savings, would you be surprised?

Many times, victims of online investment fraud have been shocked when they discovered who they were really dealing with on the other side of the screen. Unfortunately, this discovery typically comes after the money is already lost.

There are many ways scam artists use online tools to entice investors with fraudulent investment opportunities including: spam emails, online discussion boards or chat rooms, social networking websites and deceptive online advertising.

Binary options scams are a type of online investment fraud that has increased over the past two years, and unfortunately, one that many Alberta investors are falling victim to. ASC research shows that Albertans who fall victim to binary options scams lose an average of over $20,000. This number becomes even more alarming when you find out that these companies operate overseas and are not registered in Alberta, which means it is illegal for them to solicit Albertan investors.

As the financial industry becomes increasingly web-based, it becomes more important for investors to know how to protect themselves and their savings from online fraud. Here is a list of warning signs to watch out for:

1. Sending money overseas. When investors send their money overseas and something goes wrong, it can be difficult or impossible to get it back because unfortunately, regulators and agencies in Alberta can do little to help. When conducting research on the firm or advisor, it is important to confirm that your money is going where they say it is. Be sure to check that the contact information the firm provides you is accurate.

2. Guaranteed high returns and no risk. No one can offer you a guarantee – with limited exceptions all investing involves some level of risk. Typically, investments that have the potential to generate larger returns come with greater risks.

3. Unregistered investment firm or advisor. With limited exceptions, in order to legally sell securities in Alberta, an individual or company must be registered with the Alberta Securities Commission. Whenever you're online, you can run a quick and free registration check by going to www.aretheyregistered.ca

When it comes to matters of the heart or investing online, take extra precautions to protect yourself by asking the right questions and conducting your own research before spending any time, energy or money.

Helpful Links

ASC warns Albertans of top five investor risks for 2017

Investment fraud on the internet

Internet Scams

February 01
The ABCs of RRSPs 

The earlier we start to think about saving for our retirement years, the better. From pension plans, to TFSAs to conventional investing, there are many ways to contribute to your nest egg. Today we focus on RRSP basics, what they are, how they can help maximize savings and how to avoid unsafe RRSP investments.

What exactly is an RRSP?

The Registered Retirement Savings Plan (RRSP) was introduced in 1965 to assist Canadians with saving for retirement. Plainly, RRSPs are retirement savings accounts, registered with the federal government with certain tax-deferring characteristics. You can contribute to an RRSP over your working lifetime.

An RRSP is not an investment in itself, it consists of a packaged set of securities and can be built using a number of different types of CRA-qualified investments including mutual funds, exchange-traded funds (ETFs), Guaranteed Investment Certificates (GICs), Canada Savings Bonds, stocks, mortgage-backed securities and more.

Are there different types of RRSPs?

Yes, you can open an individual, spousal or a group plan.

An individual RRSP is a plan that you open for yourself that is registered in your name. The investments and tax advantages of the RRSP belong to you.

A spousal RRSP is registered in your spouse or common law partner’s name. They own the investments in the RRSP, but you contribute to it and receive a tax deduction for any contributions you make. Spousal RRSPs are used to equalize retirement income and minimize tax.

Lastly, a group RRSP is offered by some employers to help employees save for retirement. It is identical to an individual RRSP, but your employer sets it up and the contributions typically come from payroll deductions. You and/or your employer can make contributions and the contributions are tax-deductible.

How do I open an RRSP account?

Anyone who files an income tax return and has earned income can open and contribute to an RRSP. You can open an RRSP account through a bank, trust company, credit union, mutual fund company, investment firm or even a life insurance company. Like any other type of investment, it’s important to research the firm and the individual providing the services before deciding to invest.

To open an RRSP account, you would generally either make a contribution, or transfer money from another RRSP. You can also set up regular contributions through a pre-authorized debit, pre-authorized contribution or a payroll savings plan, instead of making your annual contribution all at once.

How much can I contribute each year?

There are limits to how much you can put into an RRSP each year. You are able to contribute the lower of 18 per cent of your earned income in the previous year or less than the defined maximum contribution amount for the current tax year ($25,370 for 2016).

If you belong to a pension plan, your pension adjustment may reduce the amount you can contribute to an RRSP yearly.

What are the tax-deferring benefits associated with RRSPs?

You claim your RRSP contribution as a deduction against your income on your tax return. However, you need not claim any or all of the amount of your contribution in the tax year in which you made the contribution. For example, if your income is lower during a certain year, you can carry forward the deduction for your contribution to a future year when your income might be higher. That way, your tax savings will be greater because you're in a higher tax bracket.

In addition, you won't pay any tax on investment earnings as long as they stay in your RRSP.

You can borrow from your RRSP to buy your first home or pay for your education. Under the Home Buyer’s Plan you can take out up to $25,000 to fund a down payment on your first home. You can also use up to $20,000 to pay education costs for yourself or your spouse under the Lifelong Learning Plan (LLP). You won't be taxed on these withdrawals as long as you pay the borrowed money back within specified time periods.

Are RRSPs safe from investment fraud?

No.

Again, RRSPs are packages of investments designed to help you save for retirement. The quality of the investments you choose to put into your RRSP account is important. Like any other investment decision, it’s essential to conduct independent, unbiased research on the firm or individual offering the investment as well as on the investments themselves.

RRSP accounts are not out of bounds for fraudsters. Commonly, they prey on individuals who may need early access to their RRSP funds and promise them this access “tax free” or offer a “loan” if their RRSP is locked in. They also convince individuals to divert their RRSP funds to purchase shares in a fraudulent company. In most cases, the victim is required to pay a fee to the fraudster, ends up owing taxes for withdrawing funds from their RRSP and loses a chunk of, or all of, their savings in the account.

What do I need to consider when choosing investments for my RRSPs?

Balance and diversification - no single investment can be a top performer all the time and in all economic environments. Investors who diversify are less likely to lose everything due to a downturn. Diversifying the types of investments that make up your RRSP account is also a good practice. Depending on your investment objectives, mixing safe investments (like bonds) and riskier investments (such as stocks) can help create more consistent returns over the long-term.

Risk tolerance – your risk profile is dependent on multiple factors such as your investment goals, personality and life objectives. Because saving for retirement is typically a long-term goal, you may be more willing to take on riskier investments in earlier years, when there is time to recover if something does go wrong. By the same logic, most people prefer safer investments as they near retirement. It’s important to make sure each investment matches your risk tolerance and that you periodically review and re-evaluate your strategies and portfolio, especially when there has been a change in your financial circumstances or if significant life events occur.

Time horizon – age is an important consideration when building an RRSP account and choosing investments. Did you open the account at an early age? Do you plan to max out your contributions each year? Will you withdraw money from your RRSP at any point? What age do you plan to retire? How much time do you have left? Choose investments that make sense with the timeline you’re working with. Keep in mind that you are required to close your RRSP when you turn 71; build a plan with all these considerations in mind.

Due diligence – Conduct thorough research on each investment within your RRSP account, including relevant registration or enforcement history checks, as well as reading news releases or online reports. In some cases, it may also be best to consult a professional, unbiased third party such as a lawyer or accountant for a second opinion on a particular investment or on your RRSP account as a whole.

What are some ways that help me preserve my nest egg?

Remember to check on your account regularly, open and read statements when you get them and keep an eye open for any unauthorized activity.

If you discover any discrepancies with your RRSP account, or you’ve been approached or fallen victim to an RRSP scam, contact us at inquiries@asc.ca or (877) 355-4488.

Helpful Links

RRSP Fraud or RRSP Borrowing Scheme (AMF)

Ten Tips to Protect Your Nest Egg

Beware of Scams Involving Your Retirement Savings, Regulators Warn

This blog is for general information purposes only and does not constitute legal or other professional advice. You should obtain independent professional or independent legal advice prior to acting on information in this blog or if you have questions about your particular circumstances.

January 10
New year, new investor risks to watch out for

Did you make a money resolution for 2017? Perhaps you vowed to save more diligently for retirement or pay off your debt? Your financial goals could be compromised if you fall victim to investment fraud. In a recent press release, the ASC’s enforcement and public inquiries office compiled a list of top risks for Alberta investors in 2017:

#1 Unregistered sources – Many people consult restaurant reviews before choosing to dine out to avoid disappointment or wasting their money. At the very least, the same consideration and due diligence should be paid to a potential investment opportunity. With limited exceptions, any firm or individual selling securities or offering investment advice in Alberta must be registered and there is a free and easy way to check at www.aretheyregistered.ca.

#2 Binary options scams – This top risk also made the list in 2016 and you can “bet” on the fact that there are still no registered binary options dealers in Alberta or Canada in 2017. Binary options are essentially “bets” on whether the value of an asset will increase or decrease in a fixed time frame. For more on binary options, watch this financial fraud explainer video.

#3 Offshore investments – If an investment opportunity involves sending funds to a company with “offices” overseas, it’s a red flag. When investors send their money overseas and something goes wrong, it can be difficult or impossible to get the money back, and unfortunately regulators and agencies in Canada can do little to help.

#4 Deceptive online advertising – Like many marketing and advertising companies, scam artists know the power of social/online media as a promotion tool and use this knowledge to their advantage. They may use photos of celebrities in their ads (without permission), who appear to be endorsing the investment as a tactic to lure people in who believe that a well-known celebrity supports the investment.

#5 Being lured by “the next big thing” –While investing in an emerging industry might sound appealing, it’s important to use caution before buying into the hype. There are usually very little facts available on these new companies, which makes it easy for scam artists to spread false information.

Make 2017 your most financially successful year yet, make informed investment decisions and minimize the risk of falling victim to investment fraud. Happy New Year!

Helpful Links

Recognizing Investment Fraud - ASC Case Studies

CheckFirst.ca

Investment Fraud Fact Sheet

December 28
Top five You ASC’d blog posts of 2016

top 5.jpgThroughout the year, there are a number of factors that decide which topics we blog about: what’s in the news, what we think investors will find helpful, and what questions we receive via social media and through our public inquiries office, to name a few. While we obviously think they’re all important, it’s always interesting to see which topics resonated the most with our readers. To that end, a countdown of our five most popular blog posts of 2016:

The fifth most popular blog post this year:  Perplexed about peer-to-peer lending?

Financial technology (or fintech as it’s known online) was one of the hottest topics in the media this year, combining two very popular subjects. In March, we explained the basics of one of the newer concepts in fintech,  peer-to-peer lending.

The fourth: Don’t get fooled again – avoid falling victim to investment fraud more than once (part one)

In this, the first of a two-part series, we explored “sucker lists” – one of two ways fraudsters re-victimize individuals. While you’re at it, check out the second post in that series, even though it didn’t make our “Top 5” list. 

The third: Explaining crowdfunding in Alberta

It’s no surprise that another of our most popular posts this year explains an aspect of fintech. We’ve covered crowdfunding in previous years, but this post (and a second post, in the same series) explains new regulatory developments in Alberta.

The second: What’s in a name? Does  the title of your investment professional matter?

Yet another timely post from 2016, this entry explained the intricacies of titling in financial professions. It’s particularly topical, as the ASC (as part of the Canadian Securities Administrators) has been taking part in public consultation sessions and focus groups on how to enhance the client-registrant relationship within the past few months.

And (drumroll please!)….the most popular YouASC’d blog post of the year is: Binary options: Strong caution for investors in Alberta

While we obviously think all the topics we post on are relevant and important for investors to be informed about, we’re happy to see this as our most popular post. The number of binary options scams being promoted worldwide  grew during 2016, and we want as many Alberta investors as possible to know not to get involved with them. While progress has been made on the global stage at cracking down on these schemes, there are still many targeting Alberta investors and successfully taking their hard-earned money. We want  as many of you as possible to know how to recognize and avoid this scam.

There you have it – our top five most popular blog posts of 2016! While it’s interesting to know what readers found most interesting and helpful, go ahead and check out the others in the archive when you’ve got a chance – it’s a great way to start the New Year on your best-informed financial foot.

Happy holidays and all the best in 2017!

​​

Helpful links

ASC Investor Alerts

Investor Resources

November 16
Announcing the winners of the Fight Financial Fraud contest!

The winners of our Fight Financial Fraud contest are Lisa Briscoe, Cheryl Braun and Jason MacIntosh, all from Calgary! Each has won a $100 gift card to Indigo Books, which can be used to expand their libraries with books to help them become more informed investors.

Thank you to all who have been following along with our blog and video series, and took our quiz for a chance to win. Learning about ways to spot and avoid common types of investment fraud is a great step to take towards becoming an informed investor. If you missed our Fight Financial Fraud series, don’t worry, you can find it right here on our blog. Check out the links below for more information and resources.

Helpful links

CheckFirst

National Registration Search

ASC Investor Resources

October 28
Fight Financial Fraud Contest – Week #5 Pump and Dump Enablers

Last week, we learned about the dangers of pump and dump schemes and this week we’re covering a closely-related topic, pump and dump enabler schemes.

Pump and dump enabler schemes can appear to be a valid opportunity, so if you aren’t careful, you could unknowingly become involved. The scheme starts with someone asking to use your name in a “business deal” as a shareholder, director or official for a public company. You will be told that all you have to do is provide some personal information and sign some documents. Sounds easy, right? To make the deal even sweeter, you may even be offered money for your involvement.

What you don’t know is that that this person is trying to set up a fraudulent company, and is looking for an individual with a clean name and record to get this company past the regulators. What you also don’t know is that once you’ve signed your name over, it will be linked to this company forever – for better, but more likely, for worse.

Watch the video to learn more about this type of scheme.

Our quiz goes live today at 12:00 p.m. MDT and will close on Monday, November 7 at 12:00 p.m. MDT. The only way to enter the contest for a chance to win one of three $100 gift cards to Indigo Books is to take the quiz. We hope we have helped you increase your investing knowledge over the past five weeks. Good luck on the quiz!

Click here for contest rules and regulations.

Helpful links

Investment fraud fact sheet

Red flags of investing fraud

October 21
Fight Financial Fraud Contest – Week #4 Pump and Dump Schemes

We’re making learning more fun for Investor Education Month. Every Friday, we at the ASC are showcasing one of our financial fraud explainer videos here on our blog– they’re a great way to learn about various types of fraud, and rewarding in more ways than one. Not only will you be gaining information to protect yourself and your finances, the quiz at the end is a contest for prizes!

This week, we’re talking about pump and dump schemes.

The term pump and dump is fairly descriptive of the scam itself. Individuals who own stock in a company “pump” it up by promoting it vigorously via online chat rooms, fake news releases and advertisements. When their promotions succeed, the stock price goes up, and the stock promoters will then “dump” it. They sell their shares at the “pumped” up high price, which then plummets after they sell, leaving the rest of the investors with shares that are virtually worthless.

So how can you tell it’s a pump and dump before getting involved? The typical red flags of investing apply - including promises of high rewards and low risks, and rushed, high pressure sales tactics. To learn about the specific signs of a pump and dump scheme watch the video.

Be sure to check back next Friday to learn another way pump and dump schemes create victims, those know as pump and dump enablers, and enter our contest!

To participate in the contest, read the You ASC’d blog and watch the corresponding video every Friday. Then test your knowledge with our Fight Financial Fraud quiz between October 28 and November 4. Quiz participants will be entered into a draw to win one of three $100 gift cards to Indigo Books, which we hope you’ll use to do even more reading about how to become a more informed investor. Click here for contest rules and regulations.

Helpful links

Check Out a Potential Investment

Buying stocks listed on an ‘unconventional’ exchange? Better check first

Recognizing and avoiding scams in 2016

October 14
Fight Financial Fraud Contest – Week #3 Ponzi Schemes

It’s the season of learning – school is back in session and October is Investor Education Month. To celebrate, we at the ASC are showcasing our financial fraud explainer videos– they’re a great way to learn about how to protect your financial future (without having to go to class!) You’ll even want to take the “test” at the end - it’s a quiz contest for prizes!

To participate in the contest, read the You ASC’d blog and watch the corresponding video every Friday. Then test your knowledge with our Fight Financial Fraud quiz between October 28 and November 4. Quiz participants will be entered into a draw to win one of three $100 gift cards to Indigo Books, which we hope you’ll use to do even more reading about how to become a more informed investor. Click here for contest rules and regulations.

We kick off week three with a blog and video on Ponzi schemes.

Does the name Bernie Madoff ring a bell? He orchestrated one of the longest running and largest Ponzi schemes in history. This type of scheme promises high rates of return with little to no risk for investors. What’s important to know about Ponzi Schemes, is that there is no legitimate investment. The returns that may be received are actually coming from other investor’s money.

Most of the money invested into a Ponzi scheme generally goes into the pockets of the fraudsters running the scheme. To keep the scheme running, some investors may initially see returns, making it believable and sustainable. We all know the saying all good things must come to an end, which also applies to Ponzi schemes (though they are definitely not good things). Eventually investments and new investors will cease, and with no money coming in, the scheme will collapse and investors are typically left with nothing.

Watch the video for more details and to learn ways to identify a Ponzi scheme.

Be sure to check back next Friday for an overview on pump and dump schemes!

Helpful links

Red flags of Investing

Recognizing and avoiding scams in 2016

CheckFirst

Top ten investing mistakes

October 07
Fight Financial Fraud Contest – Week #2 Binary options

Every Friday until October 28, we’re blogging about one of our financial fraud explainer videos– they’re a great way to learn about how to protect your financial future (without having to go to class!) You’ll even want to take the “test” at the end - it’s a quiz contest for prizes!

The second video we’re highlighting is about binary options, and why they should raise red flags.

Binary options are a big thing right now – there are sites all over the internet promoting these so-called “investments.” In the best case scenario, binary options are more of a bet than anything else; worst case, they’re fraudulent.

The second video in our series explains the reasons why binary options are a dangerous prospect. Many are not traded on real exchanges, and the platforms are offshore, which makes it exponentially more difficult to get your money back. Furthermore, anyone offering binary options for sale in Alberta must be registered. Fortunately, that is easy to check at www.aretheyregistered.ca.

Watch the video for more details.

To participate in the contest, read the You ASC’d blog and watch the corresponding videos every Friday starting September 30. Then test your knowledge with our Fight Financial Fraud quiz, available on October 28 and closing on November 4. Quiz participants will be entered into a draw to win one of three $100 gift cards to Indigo Books, to help you become a better investor with books about investing. Click here for contest rules and regulations.

Be sure to check back next Friday to learn about Ponzi schemes!

Helpful Links

Recognizing a Scam

CSA Investor Alert: Unregistered binary option platforms target Canadians

National Registration Search

CheckFirst

September 30
Fight Financial Fraud Contest – Week #1 Recognize and Avoid Investment Fraud

It’s the season of learning – school is back in session and Investor Education Month starts tomorrow. To celebrate, we at the ASC are showcasing our financial fraud explainer videos over the next five weeks – they’re a great way to learn about how to protect your financial future (without having to go to class!) You’ll even want to take the “test” at the end - it’s a quiz contest for prizes!

To participate in the contest, read the You ASC’d blog and watch the corresponding video every Friday starting today (September 30). Then test your knowledge with our Fight Financial Fraud quiz, available on October 28 and closing on November 4. Quiz participants will be entered into a draw to win one of three $100 gift cards to Indigo Books, to help you become a better investor with books about investing. Click here for contest rules and regulations.

We kick off week one with our first blog and video on how to Recognize and Avoid Investment Fraud.

The first step in protecting your hard-earned money and financial future from investment fraud is recognizing it. Of course we would all like to find an investment that guarantees financial security, but unfortunately, in investing as in life, if sounds too good to be true - it probably is.

The first video in our series provides an overview of investment fraud, a list of red flags and tips to protect yourself. It also reviews the different ways you may be approached, including by phone, through email/internet or by a friend or family member. If you are offered an investment opportunity that guarantees high returns with no risk, is “tax-free” or involves sending your money offshore, think twice! The best way to protect yourself is to research the investment and the person offering it, including checking registration before you make a decision to invest.

Watch the video for more details.

Be sure to check back next Friday for an overview on binary options!

Helpful Links

Red flags of Investing

Check out a potential investment

National Registration Search

CheckFirst

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