As Albertans set their financial intentions for the year ahead, it’s important to take the steps necessary to ensure an investment is right for you, and to get informed about how to protect yourself from scam artists. The Alberta Securities Commission (ASC) has released its list of the top investment risks and possible scams to look out for in 2021.
“Fraudsters are constantly looking for ways to prey on people’s vulnerabilities,” said Hilary McMeekin, with ASC Investor Education. “Once upon a time, it was the 50-plus crowd that was victimized, because they tend to have more assets and interest in investing. But now the 18-30 group is being targeted too, because they use technology more heavily. That's where scammers are today."
The ASC’s top investment risks for 2021 include:
Investments related to COVID-19 – “We have a cure.”
Fraudsters take advantage of global events, exploiting the latest crisis to lure potential investors. A common way they do this is through pump-and-dump schemes, which promise an opportunity to invest in new products or services that will prevent, detect or cure COVID-19 or otherwise aid in the fight. These schemes usually involve artificially inflating the price of a penny stock shell company through issuing false and misleading positive statements. The price of the stock rises as people invest. The wrongdoers cash out their stock at a high price before the truth is revealed and the price of the stock falls dramatically – leaving investors with nothing.
Excitement around new and emerging industries – “Don’t miss out on this opportunity!”
The ASC has seen similar scams and tactics with 'hot' industries such as cannabis and foreign exchange, where fraudsters provide misleading or false information, over-promoting the company’s value, deals and/or future expectations.
"Watch for red flags. If your 'spidey senses' feel that something is not right, listen to it," said McMeekin.
Affinity fraud – “I know the guy, so I’m sure the investment is good.”
Always a favourite of scam artists, affinity fraud happens when victims are introduced to scams by family members, friends or co-workers. Fraudsters often target ethnic communities, religious organizations, social clubs or professional groups, taking advantage of the trust and relationships that exist within. The fraudster becomes part of – or pretends to be part of – the community, flaunting their success or wealth and often enlisting unsuspecting ambassadors to spread the scheme to make it seem credible.
"We see this quite a bit. No matter who introduces you to an investment, do your own research. Do a Google search of the company--take your time. Make sure you're comfortable with it," McMeekin said.
Not qualified to sell securities – “Registration isn’t required for the products I’m offering.”
Anyone offering investments in Alberta must be registered. Lack of registration is a key red flag of fraud, yet three-in-five Albertans have never checked into the background of their financial advisor[i]. Registration of any adviser or organization can be verified by visiting the ASC’s consumer website CheckFirst.ca.
Training at a cost – “You can easily make money trading stocks at home.”
Scam artists are preying on people’s fears by using ads that promote opportunities to work from home as day traders in the financial markets. These ads typically claim that you will be trained on trading stocks or forex (foreign exchange) for a fee. They also state that traders can keep a large percentage of the profits, get high rates of return with little or no risk, and that no experience or licence is needed. Again, individuals need to be registered to trade securities.
"Part of the reason we don't get calls is that people are embarrassed that they got 'taken' or involved in a shady scheme. We want people to know they're not alone, and to reach out to us with any little bit of information. Our whistle blower complaint line is here for that--it might seem like meaningless information, but it could be a missing clue," she said.