Canadian provincial financial regulator Alberta Securities Commission (ASC) issued on Tuesday a list of the top five threads that investors could face in 2017, which included offshore investments and binary options scams.
The risks list was based on data collected by the ASC’s enforcement team and public inquiries office. It aims to hive the heads up to investors and help them detect fraudulent activity before falling victim to investment fraud.
“Making a decision to invest without doing any research is like playing with fire, you’re going to get burned ,” said Alison Trollope, director of communications and investor education at the ASC. “No matter how great an investment opportunity sounds, be sure to take time to do independent research before making a decision to invest,” she added.
Following are the ASC’s top five investor risks for 2017:
- Unregistered sources: With limited exceptions, anyone selling securities or offering investment advice in Alberta must be registered. Investors can protect themselves by checking their source’s registration, because securities regulators will only register firms and individuals that meet certain proficiency, integrity and solvency requirements. Check the registration of a person offering securities investments for free at www.aretheyregistered.ca.
- Binary options scams: Binary options, which are essentially “bets” on whether the value of an asset will increase or decrease in a fixed time frame, made the list for the second year in a row. There are no registered binary options dealers in Alberta or Canada. Based on information compiled by the ASC, Albertans who fall victim to binary options scams lose, on average, more than $20,000. Binary options companies invest a lot of money into advertising designed to lure investors, which may appear attractive given Alberta’s current economic downturn.
- Offshore investments: Sending money to companies with “offices” in countries overseas is a red flag of investment fraud. Current popular offshore investment scams include binary options, foreign exchange (forex) and commodity trading. When investors send their money overseas and something goes wrong, it can be difficult or impossible to get the money back, and unfortunately regulators and agencies in Alberta can do little to help.
- Deceptive online advertising: Scam artists often promote their fraudulent opportunities using social media, text messages and pop-up ads on the internet. They may use photos of celebrities in their ads (without permission), who appear to be endorsing the investment. These types of advertising campaigns can easily lure people in if they believe that a celebrity supports the investment.
- Being lured by “the next big thing”: While investing in an emerging industry might sound appealing, it’s important to use caution before buying into the hype. There is usually very little information available on these new companies, which makes it easy for scam artists to spread false information. Company shares in emerging industries can easily rise based on rumours, not viable information. Be aware that stocks in emerging industries are highly speculative.
In Canada, financial markets fall under the regulation and supervison of provincial watchdogs and legislation rules may vary in the various provinces. The ASC is the regulatory body for the Alberta province.