Types of Misconduct
You can lose your money in many ways – misrepresentations, illegal distributions, market manipulation, and outright fraud. Before investing, take some time to familiarize yourself with the different types of market misconduct.
An illegal distribution takes place when a private company’s securities are sold to investors without filing a prospectus or an offering memorandum or without using an available exemption. Securities regulators are often alerted to illegal distributions through complaints by investors who think they have lost their money, or where they receive no response after requesting information about the company. In most cases, an illegal distribution results in investor losses.
Frequently, a person who promotes illegal distributions is not registered in the securities industry. The sellers often misrepresent the investment they are selling to investors.
If you deal with an unregistered advisor or private company and you lose money, you will probably have to go through the civil courts to seek compensation. Learn more about how to file and pursue misconduct in our File a complaint section.
Investment industry misconduct
Companies that trade on stock exchanges have many disclosure obligations to ensure their securities trade fairly and transparently. In addition, advisors and firms must register with securities regulators, and meet a variety of obligations. Still, fraud and misconduct can and does happen within the regulated system.
Examples of stock market misconduct are illegal insider trading, market manipulation, and falsifying financial statements. Some rogue investment advisors invite a client to invest in a ‘private’ deal. This is called an off-book transaction. Advisor misconduct can also include falsifying statements, or abusing their position to steal a client’s money. Go to the Advisor misconduct section to learn more about how to identify this type of behaviour.
The regulated system offers remedies to investors—for example, account insurance and funds for firms that go bankrupt pay out investors are two examples. The best protection against any type of misconduct is to understand the investment, know your advisor, check your statements, and diversify.
Learn more about how to File a complaint.
Take the time to bring suspicious activity to the attention of securities regulators, even if you haven’t invested yourself. Your care and attention may save a friend, family member or member of your community from falling victim to a scam artist.
In BC, contact BCSC Inquiries. You can also anonymously report suspicious activity through InvestRight’s Report a scam webpage.
Residents from other Canadian provinces can find contact information for their provincial securities regulator at