June is Seniors Month. BCSC InvestRight is here to help adults over the age of 50 know how to protect themselves from investment scams.
The Canadian Securities Administrators (CSA) have a brochure that shows how pre-retirees and seniors can end up as targets of investment scams. The resource helps older investors recognize and stay away from risky, potentially fraudulent, investments.
How Scam Artists Target Older Investors
Scammers prey on those who fear not having enough retirement savings. They promise high-returns with little or no risk. In reality, these so-called “investment opportunities” result in people losing some or all of the original funds with limited recourse to get the money back.
Investment seminars that offer free meals or gifts are one way scammers target older investors. The sales tactics at these meetings pressure attendees to invest on the spot, a cause for concern even if the opportunity is legitimate.
Investors may hear from people who say they are investment experts with specific strategies to get returns. The products they sell are often high-risk and not appropriate for older investors, if the investments even exist at all.
Affinity fraud is also a common characteristic of investment scams among pre-retirees and older adults. In these scams, scammers target religious, ethnic, or close-knit community groups. After making friends with members of the group, they start selling their scheme because people are less likely to question advice from someone they know and trust.
For more information on how to protect yourself, read the Scam Artists Pursue Adults Over 50 brochure from the CSA.
Common Scams Targeting Seniors and Older Adults
Exempt securities (a.k.a. private placement) scam
In an exempt securities scam, investors get an unsolicited pitch to invest in a promising business that’s about to go public. The scammers say this opportunity is only available to a select group of individuals, but an exception can be made for you.
Exempt securities are risky because they’re sold without a prospectus, meaning it can be difficult to learn more or value the investment before you buy.
Foreign exchange or forex scam
Forex scams often find victims through newspaper or online ads. Investors are told this is an opportunity to invest with someone who has deep experience in the foreign exchange market.
Unfortunately, invested funds are rarely used to invest at all. The scammers can disappear as quickly as they arrived or say your principal was lost due to the volatility of currency markets.
Offshore investment scam
In this type of scam, a fraudster will promise a high return from an investment in a market outside of Canada. They may talk about the tax benefits of offshore locations to convince skeptical people to invest.
The challenge with offshore scams is it is difficult for local regulators and law enforcement to get money back. No matter the outcome, you could end up owing the Canadian government money in back-taxes, interest, and other penalties.
Protect Yourself: Know the Fraud Warning Signs
To avoid falling victim to an investment scam, prepare yourself to recognize the warning signs of investment fraud. These five signs cover risks like high-pressure sales tactics, affinity fraud, and concepts like offshore investing or tax minimization.
Say no, and report your suspicions if someone approaches you for an investment with any of one or more of these attributes:
- High returns, no risk
- Profit like the pros
- Offshore, tax-free
- Get in now!
- Your friends and family can’t be wrong
Run a Background Check on an Investment Advisor
One of the most effective ways to protect against fraud is to check the registration of a person or company selling or advising about securities. The CSA’s aretheyregistered.ca website is a tool investors can use to check registration and disciplinary information with a single search.
In addition to these resources, the following items provide more ways for investors to research an investment advisor or company:
- CSA: Check Before You Invest
- CSA: Understanding Registration Guide
- BCSC Disciplined Persons List
- BCSC Investment Caution List
Report Fraud to the British Columbia Securities Commission
InvestRight.org is the British Columbia Securities Commission’s investor education website.
It’s October but the chill people are feeling isn’t just from the temperature dropping outdoors as investors can’t help but shiver as they take stock of the financial mess from the past year. Add to this the stories of investment fraud victimizing people and it is no wonder that investors are feeling a bit left […]
If you are like many Canadians, you are probably just turning your attention to your RRSP and retirement portfolio. In fact, it may be the first time you’ve contemplated your retirement plan in a year, so you should probably sit down and do some reading before heading in to see your financial advisor. This post […]