Since Kate was 18, she has maximized her RRSP contributions every year. She has used several different financial advisers but felt that none of them were making investments that suited her financial goals. Even with her limited investment knowledge, Kate knew that she was young enough to take risks to maximize her retirement savings. Before she met with Daniel, she reviewed his company website and brochures and was very impressed with what she found − Daniel came across as an experienced and trusting adviser. When Kate met with Daniel, he said he could make her investments grow to reach her retirement goal. Kate invested approximately $800,000 with Daniel.
Kate’s investments initially did well, but eventually, some life events caused her to need to cash in a portion of her investments. When she tried to do this, she could not get in touch with Daniel or anyone else from his company. At this point, she sensed that something was wrong. Later on, Kate found out that she had been a victim of fraud.
This case is a classic example of affinity fraud, which exploits the trust that exists in groups of people who have something in common. Daniel used his public persona – gained through promotional radio advertisements – to build trust in people and establish his bogus investment credentials.
Background checks (beyond the company’s own materials) before investing would have found that Daniel and his salespeople were promoting and selling securities in companies in which Daniel had an ownership or management connection. Potential clients would also have found out that Daniel was not registered to offer investment advice.
Years later, Kate has still not received any of her money and has been told to expect less than a quarter of her investment back – if she is lucky. She now works two jobs and lives with a roommate.
Not being registered: Securities industry professionals are required to register with the securities regulator in each province or territory where they do business. Registration helps protect investors because securities regulators will only register firms and individuals if they are properly qualified.
Bad investments aren’t always obvious: Scam artists make a living off of taking other people’s money. Just because a company or person has a professional looking website and marketing materials does make them a credible company or person to invest with.
Accessing your money: The company or person who you’ve invested your money with should be easy to get a hold of. Before you invest, you should be made aware of any restrictions related to withdrawing your money.
