Securities Administrators release Top 5 investment frauds to watch out for

Financial Data

The Canadian Securities Administrators (CSA) recently released a list of 5 common traps scam artists use to entice investors across Canada: Many of these tactics take advantage of those troubled by economic uncertainty and volatile markets.

1. Illegal sales of misleading exempt market securities. Private placements, or securities sold under an exemption, offer legitimate businesses the opportunity to raise funds by selling shares to a relatively small number of investors as opposed to a public offering made through national securities markets. Unfortunately, scam artists illegally raise money in the exempt market by offering misleading securities that often promise investors guaranteed or unrealistic returns with little or no risk.

2. Energy investments. Swindlers continue to attempt to trick investors with the lure of untapped oil and gas reserves or new energy technologies, often using complex technical jargon to confuse the message.

3. Gold and precious metals. High precious metal prices and the promise of a ‘tangible’ asset that’s value will ‘never decrease’ make gold and silver investing seem like a sure thing. Investors should be aware that there are no guarantees, even in legitimate markets.

4. Affinity fraud. Marketing a fraudulent investment scheme to members of a group or organization continues to be a highly successful and profitable practice for fraudsters. Investment decisions should always be made based on careful evaluation of the underlying merits rather than your relationship with the promoter or recommendations from friends and family.

5. High risk or false FOREX schemes. Trading in foreign currencies requires knowledge and resources far beyond that of most investors. Con artists play on the complexity of the system, using jargon to confuse novice investors into risky trades. In some fraudulent schemes, securities may be sold, but investors’ money is not invested as promised or is simply stolen. The CSA urges investors to learn the warning signs of investment fraud and independently verify any investment opportunity and the background of the person and company offering the investment.

The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets. Investors can visit the CSA’s website to learn more.

courtesy , BMO Investorline