Regulator warns investors of top investment fraud risks

By The IJ Staff | January 10 2020 01:45PM

Photo: Freepik

This week the Alberta Securities Commission (ASC) warned investors of the top six traps to look out for in 2020. The regulator’s list is based on investor complaints, ongoing investigations and current enforcement trends.

Stock promotion related to new industries

First on the list of risks is stock promotion related to new industries. The ASC says, “scam artists capitalize on new and emerging industries as there is often limited information and history available, making it easier to spread false information.” The regulator says it has recently seen increases in potential new scams related to cannabis, foreign exchange and, especially, cryptoasset investments. “While new industries may give rise to a range of exciting investment opportunities, it is important to understand the risks associated with the business before investing your hard-earned money,” underlined the ASC.

Affinity fraud

Another major concern is affinity fraud, which occurs when victims are introduced to scams by someone they trust. “Scam artists often work their way into groups and organizations, building relationships with respected or influential members who they use to recruit new investors,” says the regulator. In Alberta currently, “religious affiliations and cultural groups, particularly in rural areas, are the most common associations  used by these scam artists,” adds the ASC.

Exploiting a bad economy

In a struggling economy, scam artists will often target those recently laid-off, observes the ASC. “A major life change can trigger stress about finances and the future, which can affect decision making. Many people will try to make up for what has been lost financially by investing in riskier investments in hopes of getting a higher return,” observes the regulator. Scammers may encourage people to cash out traditional retirement savings plans (e.g. pensions, LIRAs, RRSPs) for an investment with the promise of higher returns, ignoring any tax implications or the added risk of the 'recommended' investment. “Be wary of any investment promising high returns that are marketed as low-risk – it's another red flag of fraud,” warns the ASC.

The fourth risk on the ASC’s list is unscrupulous marketing. The regulator has received a rising number of complaints relating to private, high-risk investments that are marketed as low-risk. “Often, salespeople will position the investment as an "exclusive opportunity," or "how the wealthy make their money," which is really just a high-pressure sales tactic. It's your hard-earned cash; take the time to invest it wisely,” advises the regulator.

Unregistered individuals selling securities

The ASC says it continues to receive reports of non-registered individuals selling investments. “Generally, anyone offering investments in Alberta must be registered with the ASC, and lack of registration is a key red flag of fraud,” says the regulator, adding that four-in-five Albertans do not check the registration of their advisor. In Alberta, the registration of any advisor or organization can be checked by visiting

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