Many people turn to those they trust as sources of information when it comes to investing. Be careful, the ones you trust and respect don’t always have the right answers.
An investment scam that targets a close-knit group (families, religious groups, clubs, etc.) is known as an affinity fraud. Scam artists take advantage of the intrinsic trust within a close group of people in order to orchestrate an elaborate investment fraud.
BCSC InvestRight’s “Fraud Among Friends & Family” video, the second video in the Spot Investment Scam series, shows how quickly a scam artist can infiltrate a group of people and drag them all into a spiraling scheme.
Sometimes friends and family will promote this type of investment because they are expecting great returns, but other times it can be because they are getting a commission for bringing in new investors. They may not know that it is a scam, but when it collapses, friendships and family relations often suffer irreparable damage.
So, how can you avoid affinity fraud?
Be suspicious when approached with an investment described as exclusive or only offered to a particular group of people. Watch out for investments or advisors who exploit a personal connection and research their backgrounds and credentials before committing to a deal.
Do your homework and seek a third party opinion when considering any investment. It is always a good idea to ask for a prospectus or other detailed written information outlining the nature of the investment, the risks involved, financial statements, and any withdrawal or trading restrictions.
For more information on affinity fraud warning signs or if you believe that this is happening to someone you know, visit BCSC InvestRight’s Affinity Fraud Warning Signs webpage.
Contact the British Columbia Securities Commission’s Inquiries Group at 604-899-6854 or 1-800-373-6393, or through email at [email protected] if you have any questions or concerns regarding an investment. You can also report suspicious activity online through BCSC InvestRight’s Report a Scam form.
In the spirit of back to school, we thought it would be a good time to point people to some tools they can use to test on their fraud awareness. Take the Fraud Challenge In March, we launched The Fraud Challenge, an interactive quiz that allows you to test your vulnerability to fraud. The five […]
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