Investor Alert: BCSC warns investors about online investment groups and meet ups
Vancouver - The British Columbia Securities Commission is warning the public to look out for possible affinity frauds when using social networking websites that facilitate or advertise meetings related to investment products and seminars.
Websites, like Meetup.com and Craigslist.org, allow people to create groups around investing strategies or advertise seminars for new investment products.
“We are concerned scam artists are using social networking websites to lure people to meetings that may promote fraudulent or unsuitable investment products,” says BCSC Executive Director Brenda Leong. “Investors need to do their own research before making an investment and should not simply rely on ‘expert’ advice given at a seminar or meeting.”
Social networking websites create an environment ripe for affinity fraud. Fraudsters can take advantage of the fact people can share information with both their real and “virtual” friends by posting it to their profile, joining a group or simply forwarding the information to others with their approval. Communication tools provided by some social networking websites make it easy to advertise and promote investment scams to a wide audience for free.
“People need to be cautious when acting on or passing investment information to others. Victims of affinity frauds are often family, friends or community members who tell each other about the fictitious investment scheme,” says Leong. “Fraudsters can exploit social networking websites to reach people’s contacts that may include past friends, associates or even people they’ve met randomly over time, and create a larger network of potential victims.”
Fraudulent investment schemes usually exhibit one or more of the following red flags:
- Promise of high returns
- Great investment opportunity - your friends can’t be wrong
- Secrecy - an insider opportunity
- Tax-free investment or use of a structure to evade taxes
- Lack of receipts or documentation about the investment
Leong is warning investors approached about an investment with these characteristics to make sure they do their research before investing. Part of this research is to examine thoroughly the backgrounds of the principals behind the investment deal or the seminar.
“Investors should be checking to see whether the people selling or promoting the investment are registered to sell securities. Do they have a regulatory history, or have they ever run into financial troubles such as bankruptcy? Also, investors should visit the offices of the business to ensure they are operational and not simply a mailbox,” Leong says.
For resources on how to conduct background checks or what to watch out for to prevent falling victim to investment fraud or making an unsuitable investment, visit the BCSC’s InvestRight.org website.
“Our research tells us few people are reporting investment fraud to the proper authorities,” says Leong. “The BCSC is urging people to report suspicious activity. This information can help us act more quickly to disrupt and stop the activity, and prevent investors from being victimized.”
People are encouraged to report suspicious investment activities, problems with investment or concerns about an adviser to the BCSC’s inquiries line at 604-899-6854 or 1-800-373-6393 (toll-free in BC & Alberta).
InvestRight is the BCSC's one-stop resource for investors to educate themselves on how to make informed investment decisions. Its comprehensive website at www.InvestRight.org provides a wide range of tools to help investors develop critical thinking skills they need to protect themselves - information such as how to do background checks, investment products, a scam meter and video clips from victims of investment fraud. The BCSC's RED-FLAGS communications campaign alerts investors to common sales pitches used by scam artists along with a province wide seminar program.
The BCSC is the independent provincial government agency responsible for regulating trading in securities within the province. If you have questions, contact Ken Gracey, Media Relations, 604-899-6577.
Learn how to avoid investment fraud at the BCSC's investor education website:www.investright.org.