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March is Fraud Prevention Month and throughout the month we’ll be focusing on fraud. Today’s question is all about how you can spot investment fraud and scams and avoid losing your money.
Unfortunately, there are many fraudsters out there looking to take advantage of people looking for the next get-rich-quick investment to earn them big money. Knowing the warning signs of fraud will help you tell the difference between what fake and what’s real. Here are a few of the warning signs to look for…
1. You were promised a high return for low risk.
If you can remember that an investment that offers the potential of high returns always comes with higher risk, you’ll be able to avoid most frauds and scams. If it sounds too good to be true it almost always is.
2. You have to act now and are given no time to think it over
Many fraudsters use high-pressures tactics that force investors to make a decision right away. They like to throw around phrases like “act now,” “get in on this,” “one-time opportunity,” “time is short,” or“get in before time runs out.” If the person you’re dealing with doesn’t want to give you time to decide or further research the opportunity, they’re most likely hiding something. Never be pressured into making an investment without having all the facts and information you need to both understand what you are doing and be comfortable with all the potential consequences.
3. You are being given confidential or inside information.
Fraudsters love to make their victims think they’re special. That they’re being given information that no one else has and it will lead them to great wealth. The trouble with being given so-called insider information is you have no way to verify if it’s true. The fraudsters know this and combine that with high pressure sales tactics to hook their next victim. Even if this information does prove to be accurate, trading on inside information is illegal in Canada, and you could go to jail for it.
4. Is there a credible source that can validate the investment?
Whenever you receive an unsolicited investment offer or opportunity you should always verify that it is real. Many fraudsters offer investors an investment that doesn’t even exist. By the time the investor figures this out the fraudster and their money are long gone. Always make sure the investment is real by verifying it with your provincial regulator.
5. Are they registered?
If someone is trying to sell you securities or offering you investment advice they must be registered with the provincial securities regulator. This is easy to check and is the first step in protecting your investment and financial future.