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Today’s Fraud Friday post will look at two common scams - Exempt Securities Scams & Forex Scams. Both scams involve legitimate investments options, exempt securities and forex, but the way they are being offered and sold is disingenuous.
We’ll start with exempt securities scams. When a company in Canada wants to sell securities to the public they must file a prospectus with a securities regulator. A prospectus is a fancy word for disclosure or information that is intended to help investors decide whether they want to buy those securities. Exempt securities are in a different category, and oftentimes the prospectus or disclosure is much less detailed. As a result, there are limitations placed on to how exempt securities can be promoted and traded. Exempt securities in and of themselves are legitimate; on their own they are not a scam.
The scam arises with an unsolicited call or email offering the opportunity to invest in a company that is about to offer shares to the public. The opportunity is typically only available to the very wealthy, but an exception is being made for you if you can sign the required paper work and fork over the dough. The fraudsters often encourage you to lie about your income. Lying on an application form and being asked to present false information should always be a red flag when you are investing.
Forex is the word people use to describe foreign exchange – another legitimate type of investment that is manipulated by fraudsters. Fraudsters usually find their victims through ads placed in newspapers classifieds, on radio or television, or on the Internet. The ads appear to be professional and legitimate and offer investors the opportunity to invest in foreign exchange, using a fictitious ‘great track record,’ and the promise of high returns.
Instead what usually happens is your money is not invested in anything. It is stolen by the fraudster and you never see it again. Even if your money is invested the high risk of those investments is not communicated, presenting a very serious risk that some or all of your money will be lost.