Investor Alert: Beware of investment ploys touting foreign direct investments in India

 

November 6, 2006

Vancouver – British Columbians should be careful if they are approached about investing in nations with rapid economic development such as India, warns the province’s securities regulator.

“We are warning people to be wary about being solicited to invest in real estate or infrastructure projects in India with promises of substantial returns,” says Brenda Leong, BC Securities Commission executive director. “This is the first InvestRight RED ALERT that we are issuing as part of our efforts to disrupt, stop and or prevent fraud from happening in BC communities.”

While BCSC staff cannot reveal names or specifics yet, says Leong, they have seen suspicious investment ploys in which small companies solicit money from Indo-Canadian investors, primarily in the Lower Mainland. Investors are told that India is undergoing rapid economic development and requires massive capital investment over the coming few decades. They are told that some of this investment will come from outside of the country, through Foreign Direct Investment (often abbreviated as FDI). Investors are also told that the Indian government is especially encouraging investments from persons of Indian ancestry living abroad. Typically, investors learn about the investment through friends or business associates.

Leong says people should be careful if they are approached to invest in foreign countries. To protect themselves, investors should:

  • Ask questions, do their own research, and make sure they understand the investment they are considering and the risks involved
  • Ask for financial statements and check on the veracity of this information
  • Make sure they understand clearly how the money is being spent on a project
  • Not rely solely on newsletters or company materials for information about a project or status of investments
  • Check out the background of the people selling the investment and assess their claims about business connections and their experience in doing business with the foreign country
  • Check into a company’s claims about leading large real estate or infrastructure projects overseas – especially if the claim is being made by an outfit that seems too small to lead such large ventures

Consider it a Red Flag if those selling the investment promise that the investor can save or escape Canadian taxes, or that the opportunity is a secret deal that investors should keep to themselves. For resources on how to conduct background checks or what to watch out for to prevent falling victim to investment fraud or making an unsuitable investment, visit the BCSC’s InvestRight.org website.

In early October, the BCSC announced plans to give people early alert or warning about activity that bear the hallmarks of a fraud.

“Too often when people finally complain or report a scam to us, it is too late for them to get their money back,” says Leong. “These InvestRight Investor Alerts will help us to raise public awareness about suspicious activity. We also hope that more people will step forward and report these types of activities to us earlier.”