2021 Top Investment Risks

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The year 2020 will long be remembered for its challenges. Global crises, like the COVID-19 pandemic, can create great investment opportunities, but can also create emotional and stressful situations that are often exploited by fraudsters looking to scam you out of your hard-earned money. As you consider your financial planning for the year ahead, it’s important that you research any investment to ensure it’s right for you and have the information necessary to protect yourself from the common tricks of scam artists.

To inform and help empower you to make the right investment choices and to protect yourself, the Alberta Securities Commission (ASC) released its list of the top investment risks and possible scams to look out for in 2021. This list is based on investor complaints, ongoing investigations and current enforcement trends.

1. Investments related to COVID-19

A common scam is a pump and dump scheme, where fraudsters promote the opportunity to invest in new products or services to (in the case of COVID-19) aid in the battle against the pandemic. In reality, their claims are false and misleading. After they have heavily promoted (“pumped”) the “opportunity” and the stock prices get artificially inflated, the fraudsters “dump” their stock at the high price, leaving investors with nothing once the truth is revealed and the price of the stock falls dramatically. When investing, do your own homework and carefully research the company and the investment. Make sure you are comfortable with the risk associated with the investment you are considering.

2. New and emerging industries

New and emerging trends/industries make it easier for fraudsters to build investment scams and promote them with false information. There is usually limited information surrounding emerging industries and plenty of hype and excitement for their future potential. So while the new industry may be legitimate, be wary of anyone offering you an investment that seems to have vague or confusing details and sounds too good to be true.

3. Great expectations

Be wary of high-risk investment opportunities, especially if they promise high returns resulting from a proposed deal involving a letter of intent. Proposed deals can fall through, so if it’s being promoted as a sure thing, you should be wary. Before you invest, research the company, the deal and the parties involved. Even if it’s not fraudulent, make sure you’re comfortable with the risks associated with the investment.

4. Affinity fraud

Affinity fraud occurs when victims are introduced to scams by someone they know, such as family members, friends or co-workers. Fraudsters often target ethnic communities, religious organizations, social clubs or professional groups. They pretend to be part of the community and take advantage of the trust and relationships that exist within. They often flaunt their success or wealth and use unsuspecting people to promote the scam to others who trust them. Even if you trust the person encouraging you to invest, protect yourself by researching the person and/or company selling the investment, and make sure they are registered to sell it.

5. Non-registered people selling investments

Generally anyone selling investments in Alberta must be registered with the ASC and lack of registration is a key red flag of fraud. Be sure to check the registration of any adviser or organization and be wary of anyone who tells you that registration isn’t required for the products being offered.

6. Fraudulent ads to work from home as a day trader

Ads that claim you can make good money by working from home as a day trader are popping up more frequently. They say no experience is necessary and all you need to do is pay a fee for the training. However, often, the firms offering these services are not legitimate and the goal is to steal the money you paid as a “fee”. It’s important to remember that, to trade securities, you need to be registered. Also, trading stocks or foreign-exchange is inherently high-risk and complicated.

Protect yourself in 2021. Do your research. Keep an eye open for the red flags of fraud and report any suspicious investments to the ASC’s public inquiries office. The free resources on CheckFirst.ca will help you stay informed, and the new Fraudster’s Playbook “Don’t be Fooled by Fraud” outlines steps that scam artist take so you can recognize and avoid them.

Keeping your money safe while investing

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Investing can be part of a healthy financial future, enabling you to grow your money for retirement and financial goals like vacations or your child’s education costs. Making sure any investment opportunity fits in your financial plan or goals is important.  So is protecting yourself from market manipulation or investment fraud.

In a recent study by the Alberta Securities Commission (ASC), 1 in 4 Albertans believed they were approached with a possible fraudulent investment. As COVID-19 continues to affect our lives, associated scams have emerged as fraudsters try to exploit the crisis to profit from Albertan’s fears and misinformation. While the look of a scam may vary, fraudsters follow a series of steps that are easy to identify if you know what to look for. To understand those seven steps, the ASC created a new resource entitled “Don’t be fooled by fraud”.  It outlines the steps fraudster’s take, in addition to providing information on how to avoid a scam and protect yourself.

Step One:  Identifying a potential victim

A fraudster’s first step is to identify targets. They leverage current events like a pandemic or economic downturn and source vulnerable investors with common anxieties or fears about their money.

Step Two: Befriend and earn trust

Once fraudsters have found suitable targets, they move quickly to cultivate friendships and gain trust. They often do this through community groups, organizations, online groups and through your friends or family to establish themselves as a reliable resource and authority.

Step Three: Showcase the benefits of investing

As the targets become trusting, the fraudster will flaunt their wealth and success to establish credibility. They will casually mention the investment opportunity that brought them this wealth, telling them that it came at little to no risk.

Step Four: Offer the investment

With the potential target’s trust in place and the perceived credibility of his investor savviness solidified, fraudsters move fast to offer the “investment opportunity”. To ensure targets quickly buy-in and do little or no research, they will sell it as an exclusive or time-sensitive offer, private deal and promise high returns with little to no risk.

Step Five: Receiving money for the investment

Leading up to receiving money, fraudsters will inundate targets frequently with communication, provide confusing and complex paperwork to establish legitimacy, and highlight the urgency of buying-in as soon as possible.

Step Six: Disappear (the Ghosting Act)

Once the target “invests”, fraudsters reassure the victim of the investment opportunity and even request more funds for a bigger payout. Following this, they will delay access to funds and eventually disappear and ignore the target when the scam can no longer be hidden.

Step Seven: Target the victim again ( the Recovery Act)

Fraudsters are hardly finished once a scam is complete. They will often sell the victim’s information to another fraudster or criminal organization, which will contact the victim acting as a credible agency that can reclaim their investment for a fee. This is ultimately another scam in which the victim is robbed again in their attempts to get their money back.

Understanding these seven steps is important so that you can recognize unsafe situations you or someone you know could be in. To learn more, read the fraudsters playbook entitled “Don’t be fooled by fraud”, accessible for free at www.checkfirst.ca/playbook. While visiting checkfirst, check out the other information and resources designed to help you increase your investing knowledge and keep your money safe when considering any investment.

Connecting with the seniors in your life about investment fraud

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Current pandemic measures have dramatically changed how we interact with our friends and family. While physical distancing affects everyone, seniors are experiencing increased isolation and loneliness as friends and family are unable to visit in person.

Unfortunately, fraudsters see this as a prime opportunity to become a “trusted” friend in a senior’s life so they can take advantage of them or their retirement nest egg through fraudulent scams or unsuitable investments. Scammers use a variety of methods to target seniors, including emails, mail, phone calls and even in-home visits.

The danger of financial abuse is real. In a 2020 study conducted by the Alberta Securities Commission one third of Albertans 55-plus believe they’ve been approached with a potentially fraudulent investment scam through a co-worker, family member, friend or even a member from a club, group or organization they belong to.

Fraudsters use a variety of tactics to defraud seniors, including:

  • Leveraging their trust and politeness to establish friendships quickly.
  • Instilling fear that they will run out of money in retirement and burden their family.
  • Exploiting current events like the pandemic to offer fake investments in cures and new technologies.
  • Using high-pressure sales tactics.
  • Promising high returns with little or no risk and exclusive opportunities.
  • Unsolicited investment opportunities and friend requests through Facebook and social media.

How can you help protect seniors in your life from investment fraud?

You can help protect your friends and family from investment fraud with open communication about their daily lives and financial decisions. Calling them routinely can help reduce social isolation and disrupt any suspicious activity that might be happening. If you believe someone you know might be at risk, be proactive and do the following:

  • Bring up the topic of investment fraud. Share the dangers of investment fraud during this time and send them information specifically created for seniors.
  • Listen and be engaged. Be open to discussing issues or topics regarding their finances and help them check the registration and history of any individual or firm offering them an investment opportunity.
  • Pay attention to their social circles. Have they been mentioning a new friend or someone who has started providing them advice, financial or otherwise? Ask questions respectfully and monitor any ongoing suspicious activities.

 

If you suspect you or someone in your life may be involved in a potentially fraudulent investment scheme find help and more information at checkfirst.ca.

 

 

 

Scams exploiting fears and isolation of older Albertans amid COVID-19

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The COVID-19 pandemic has impacted lives around the world, including families across Alberta and especially seniors, who are isolated from support groups. The recent volatility of the markets, coupled with potentially lost retirement savings and social isolation, has created an environment of fear, uncertainty and vulnerability. Unfortunately, this is exactly the environment that scam artists prey upon.

As COVID-19 continues to spread, associated scams are emerging as scam artists exploit the crisis to profit from people’s fears, uncertainties and misinformation.

There are many types of fraud popping up during COVID-19. One example includes phishing and malware scams where scammers pose as governmental agencies, national or global health authorities, and send phishing emails or texts designed to trick people into downloading malware or providing personal identification and financial information. They can appear to be real, but err on the side of caution and think carefully before providing anyone with this information.

Another common scam are pump-and-dump schemes involving publicly traded small “shell” companies. Scam artists will ‘pump’ up the company’s value by enticing investors to purchase stock with inflated or false claims, then quickly ‘dump’ their stock before the hype ends. This results in a substantial payout for the scam artist while all the remaining investors lose their money. Often pump-and-dump schemes can be related to companies claiming to have products or services that will prevent, detect or cure COVID-19 infection. Be cautious of any claims that a company has a solution to help stop the coronavirus outbreak.

There are multiple ways that scam artists will target an individual. According to a 2020 study conducted by the Alberta Securities Commission (ASC), some of the most common ways Albertans 55+ years of age believed they were approached with a potentially fraudulent investment scam were:

  • Through a friend, neighbour, co-worker or family member, or from a member of a club, group or organization they belong to (32%)
  • By a stranger calling over the telephone (22%)
  • From email spam (23%)

When considering investing in any opportunity, always read the fine print and research the investment – no matter how the opportunity was presented to you. Keep in mind that fraudsters often exploit the latest crisis with the COVID-19 outbreak being no different. Don’t be lured in by promises of easy returns – more likely you’ll be asked for money upfront that you’ll never see again. Also remember that anyone selling investments needs to be registered with provincial securities regulators to do so. For more information on how to recognize and avoid these scams and to check the registration of any individual or firm offering you an investment opportunity, visit the Alberta Securities Commission’s website: Checkfirst.ca.