You've been offered an attractive investment? Here are 5 steps to help you decide if the offer is a potential scam.
- Are the person and the firm offering you the investment authorized to sell it? Consult the Register of firms and individuals authorized to practise.
- Were you provided with full written information on the investment?
- Is the investment being offered too good to be true? If so, then it’s likely a fraud.
- When you were offered the investment, was this type of statement made to you?
- I have it from a reliable source that this investment will skyrocket. It's a sure bet.
- The company will soon be publicly listed.
- It's imperative that you invest today. Tomorrow will be too late.
- All my clients have put their money in this investment.
- Did the person who offered you the investment behave in the following manner?
- Refused to say which firm he worked for. For example, tried to change the subject after providing only scant information.
- Asked you to keep it a secret.
- Told you that a regulatory agency had "approved" an investment.
- Pressured you to invest.
Here are two classic fraud tactics.
A Ponzi scheme consists in taking an investor’s money to pay bogus returns to other investors or simply to reimburse investors who want their money back. Fraudsters can thus give the false impression that the investment is generating good returns and that you will have no problem recovering your money.
When fraudsters can’t find new investors, they become unable to pay back the existing investors and that’s when victims suspect a scam. However, by then it’s too late because the money is gone. The Ponzi scheme can be combined with many other types of fraud.
Fraudsters sometimes associate with people who share the same beliefs or even interests. Their objective is to build credibility. They forge ties with you and begin, subtly at first, to boast about their success and wealth, then, gradually, more blatantly.
Once you’re convinced that they’re credible, they’ll propose “attractive” investments. In some cases, they’ll ask you to keep this “golden opportunity” under your hat, because they only want to let their friends in on it.
The fraudster is the only one who’ll benefit. You, on the other hand, will lose some or all of the money you invested.
Follow the guide!
The guide Red-flagging financial fraud (pdf - 7 MB)This link will open in a new windowUpdated on 23 October 2015 explains how to recognize various types of fraud in 5 steps.
Documentation and tools
- Red-flagging financial fraud (pdf - 7 MB)This link will open in a new windowUpdated on 23 October 2015
- Choosing an Investment Dealer or Representative (pdf - 4 MB)This link will open in a new windowUpdated on 22 August 2016
- Trust must be earned! (pdf - 1 MB)This link will open in a new windowUpdated on 15 September 2014