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How to spot an investment scam

By The IJ Staff | March 15 2017 11:30AM

The Competition Bureau and the Ontario Securities Commission (OSC) have teamed up to offer Canadians advice on how to detect fraudulent investments.

In an announcement released March 14, the organizations underlined that March is Fraud Prevention Month and that consumers can protect themselves from financial crime by being wary of red flags that may indicate an investment opportunity is actually a fraud. 

You can make a lot of money with little or no risk

Generally, higher-risk investments offer higher potential returns and vice versa. This is known as the risk-return relationship. “When you buy investments like stocks, there's no guarantee you'll make money. And the risk of losing money increases with the potential return. So, if you're promised high returns, with little risk, think twice,” explained the OSC and the Bureau.

You get a hot tip or insider information

They also warned that you should be skeptical of anyone offering hot tips or insider information. “Think about why they're offering you tips, and how they benefit by telling you about them. If the hot tip is false, you may lose your money if you act on it. If it is really insider information about a public company, it may be illegal to act on it.”

You feel pressured to make a decision

High-pressure tactics are another warning sign. “If you're asked to make a decision right away, or are presented with a limited time offer, it's likely not in your best interests. Scammers know that if you have time to check things out, you may not fall for their scam,” underlined the OSC and the Bureau.

The seller isn't registered with the provincial securities regulator

Check the registration and background of the person offering the investment, they advised. “In general, anyone selling securities or offering investment advice must be registered with their provincial securities regulator. To check registration, visit CheckBeforeYouInvest.ca.

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