Biggest investment scams

Scam artists looking to ensnare investors are taking advantage of those troubled by economic uncertainty and volatile markets, says The Canadian Securities Administrators.

“Scam artists follow the news and economic trends, often using the headlines to their advantage,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission. “They will try to lure investors with the opportunity to protect themselves from economic uncertainty or get in on the ‘ground floor’ of new technologies that turn out to be false or exaggerated.”

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.

Investors are reminded that while securities regulators cannot provide advice, they can provide background information about those who sell securities or give investment advice, as well as about the products being offered.

The CSA list of the Top Five Investment Scams are as follows:

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. Furthermore, these individuals are often not registered to give investment advice or make securities transactions.

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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 will “never decrease” in value 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 tactic. 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.