October 23, 2020 is the deadline to provide feedback on the self-regulatory organization (SRO) framework consultation paper.
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Jan 08, 2020
CALGARY – January 8, 2020 – A new year brings new investment opportunities, and investing is a great way for Albertans to achieve their financial and retirement goals. Some investments, however, are too good to be true – and the Alberta Securities Commission (ASC) is warning of the top six traps to look out for in 2020. These are based on investor complaints, ongoing investigations and current enforcement trends as identified by the ASC’s Enforcement division.
Stock promotion related to new and emerging industries – “You don’t want to miss out!”
Scam artists capitalize on new and emerging industries as there is often limited information and history available, making it easier to spread false information. The ASC has recently seen increases in potential new scams related to cannabis, foreign exchange and, especially, cryptoasset investments. While new industries may give rise to a range of exciting investment opportunities, it is important to understand the risks associated with the business before investing your hard-earned money.
Affinity fraud – “You can trust me.”
Affinity fraud, where victims are introduced to scams by someone they trust, continues to be a major concern in Alberta. Scam artists often work their way into groups and organizations, building relationships with respected or influential members who they use to recruit new investors. Currently, religious affiliations and cultural groups, particularly in rural areas, are the most common associations used by these scam artists. Learn how you can easily recognize affinity fraud in your community and how to contact the ASC if you see any suspicious activity.
Exploiting a bad economy –“Cash out your traditional retirement savings, you’ll earn more!”
In a struggling economy, scam artists will often target those recently laid-off. A major life change can trigger stress about finances and the future, which can affect decision making. Many people will try to make up for what has been lost financially by investing in riskier investments in hopes of getting a higher return. Scam artists will encourage those feeling financial pressure to cash out traditional retirement savings plans (e.g. pensions, LIRAs, RRSPs) for an investment with the promise of higher returns, ignoring any tax implications or the added risk of the ‘recommended’ investment. There is a relationship between risk and reward; generally, the higher the potential reward, the higher the risk. Be wary of any investment promising high returns that are marketed as low-risk – it’s another red flag of fraud.
Unscrupulous marketing – “Get rich quick!”
There is a relationship between risk and reward; generally, the higher the potential reward, the higher the risk. The number of complaints relating to private, high-risk investments that are marketed as low-risk are on the rise in Alberta. Often, salespeople will position the investment as an “exclusive opportunity,” or “how the wealthy make their money,” which is really just a high-pressure sales tactic. It’s your hard-earned cash; take the time to invest it wisely.
Unregistered individuals selling securities – “Registration doesn’t matter, I know what I am doing.”
The ASC continues to receive reports of non-registered individuals selling investments. Generally, anyone offering investments in Alberta must be registered with the ASC, and lack of registration is a key red flag of fraud. Yet, four-in-five Albertans do not check the registration of their advisor1. Albertans can quickly and easily verify the registration of any advisor or organization by visiting the ASC’s consumer website Checkfirst.ca.
There has been a rise in reports of investors being promised better and safer returns than the stock market by loaning money through something called a “promissory note.” The fraudster will claim that the promissory note - which is simply a “promise to pay” - is not a security, so they don’t have to be registered with the ASC. They will also claim that it’s safe because it’s a loan backed by assets like real estate. In reality, it’s a security and if you’re not on title the loan isn’t secured by real estate – more importantly, the “loan” may be just a scam.
"We strongly encourage Albertans to expand their financial knowledge in order to make wise investment decisions with our free, unbiased tools and resources on our website, Checkfirst.ca,” said Alison Trollope, Director, Investor Education and Communications. “Checkfirst.ca provides information on how to detect and avoid investment fraud, recognize the red flags of fraud and report suspicious activities to our public inquiries office.”
The ASC’s Enforcement division uncovers, investigates, and prosecutes breaches of securities laws with the objective of both stopping and preventing misconduct. Through proactive, fair, and visible enforcement action locally, and through collaboration with other securities regulators and police forces, Canadian and foreign, the ASC seeks to foster investor confidence and promote the integrity of Alberta’s capital market, thereby protecting the investing public.
The ASC is the regulatory agency responsible for administering the province's securities laws. It is entrusted to foster a fair and efficient capital market in Alberta and to protect investors. As a member of the Canadian Securities Administrators, the ASC works to improve, coordinate and harmonize the regulation of Canada's capital markets.
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12018 Alberta Investor Study, Alberta Securities Commission.
For further information please contact:
For Media Inquiries:
For Investor Inquiries:
Hilary McMeekin Communications Manager 403-592-8186
ASC Public Inquiries Toll Free: 1-877-355-4488