By The Book:

(January 31, 2008) The British Columbia Securities Commission is warning the public about investment frauds that use social networking sites to attract victims.

“We are concerned scam artists are using social networking websites to lure people to meetings that may promote fraudulent or unsuitable investment products,” says Brenda Leong, BCSC executive director. “Investors need to do their own research before making an investment and should not simply rely on ‘expert’ advice given at a seminar or meeting.”

So-called “affinity fraud” can spread rapidly as people post information to their profiles, attracting their friends — both real and virtual — to the scam.

The BCSC cautions investors to be wary of any program promising high returns, or those requiring secrecy. Other red flags include offers of “tax-free” investments and any investment that lacks receipts or documentation.

“People need to be cautious when acting on or passing investment information to others. Victims of affinity frauds are often family, friends or community members who tell each other about the fictitious investment scheme,” says Leong. “Fraudsters can exploit social networking websites to reach people’s contacts that may include past friends, associates or even people they’ve met randomly over time, and create a larger network of potential victims.”

For resources on how to conduct background checks or what to watch out for to prevent falling victim to investment fraud or making an unsuitable investment, visit the BCSC’s InvestRight.org website.

(01/31/08)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.