Free conferences or seminars about investing are occasionally advertised in newspapers and on the radio. You can also receive information on these events by mail, e-mail or through an acquaintance. These seminars usually take place in hotels or other public venues.
Investments proposed at these conferences might not be right for you. Some information sources may not be trustworthy or may even be fraudulent.
Take the time to become informed.
Some unscrupulous individuals use seminars to highlight investment strategies with seemingly—but not actually—incredible returns. They promise higher returns than those to which you are accustomed.
Generally, the higher the projected return, the greater the investment risk.End of the warning
Suggested readingEnd of the insight
How to detect possible fraud
If seminar speakers use sales techniques that make you suspicious, proceed cautiously. Here are some warning signals to heed:
- The speakers try to sell you another series of high-priced seminars or a membership that will provide "revolutionary” strategies that are “used by wealthy people."
- They insist that returns generated by "traditional investments" like certificates of depositA certificate of deposit, also called a guaranteed investment certificate (GIC) or term deposit, is a security indicating that an investor has lent money to a financial institution. Certificates of deposit earn interest. , stocksA share, also referred to as stock, is an equity security that entitles you to an ownership interest in a company.
The company can distribute a portion of its earnings to shareholders by paying them a dividend.
The shares of companies listed on an exchange are bought and sold at the exchange.
When a company ceases to operate, the proceeds from the sale of its assets are used to pay its debts and taxes, and the rest of the money is distributed to shareholders., bondsA bond is a security issued by governments and companies through which an investor lends money to the issuer.
In general, the government or company promises to pay the investor interest at a fixed rate and at certain intervals (for example, 2% per year). Interest is normally paid twice a year. At maturity, the government or company pays back a predetermined amount that is called the face value. The face value is usually $1,000.
There are several types of bonds:
Stripped bondReal return bondConvertible bondSavings bondRetractable bondUnsecured bondEtc. and mutual fundsA mutual fund is made up of money that is pooled by several investors and used on their behalf by a manager to buy shares, bonds or other securities in line with the fund’s objectives. aren't attractive enough to meet your requirements.
- They talk about high-yield investments that are risk-free.
- They disparage representatives, dealers, banks, credit unions and other financial institutionsA financial institution is a company or organization that provides financial services (loans, etc.) to the public and to businesses. Banks, trust companies and credit unions are financial institutions. , and discourage people from consulting them.
- They begin by stating that they do not recommend any specific investments, and then mention certain companies or firms that generate excellent returns.
- They don’t provide audited financial statementsFinancial statements are the accounting reports that provide an accurate picture of a company’s financial position for a given period. or prospectusA prospectus is a detailed information document that a company must prepare to be able to sell securities (such as shares) to the public.
It must provide full, true and plain disclosure of all material facts likely to affect the value or market price of the security in question. from these companies or downplay their importance.
- They focus on testimonials from investors who have pocketed substantial amounts. Be careful: This money may not be profits generated by investments, but rather funds invested by other individuals (Ponzi scheme).
- They stress tax benefits.
- They encourage you to borrow funds for investment purposes, without explaining the risk of such a strategy.
- They criticize regulatory or governmental bodies for "preventing investors from making money" or "being in league with major financial institutions."
In some cases, companies touted by speakers are owned by seminar promoters, are barely profitable, or aren't even operational.
Be wary of testimonials!
An early investor pays $50,000 for an “incredible” investment. A few months later, the person receives a $20,000 cheque for his share of the “profits.” He believes he made a 40% return and speaks to other persons to convince them that the investment is really incredible.
After hearing his testimonial, other investors decide to follow his example.
In fact, the $20,000 came from the initial $50,000 investment. In other words, the $50,000 amount is now worth only $30,000.
When the fraudster believes he collected enough money, he disappears with the money. Early investors recovered only $20,000 of their $50,000, losing $30,000. The others lost 100% of their $50,000. This is what is known as a “Ponzi scheme.”
Important: Being offered a return of 5%, 6% or 7% may be enticing when stock markets are underperforming.End of the warning
Ask yourself how the investments recommended by speakers can offer such attractive returns.
Request audited financial statements, prospectuses and other relevant documents.
If need be, speak to an authorized representative to evaluate if the investment can generate enough profits to achieve the promised returns.End of the insight
- Check that the firm and individual you are dealing with are authorized to sell you the investments they are offering. Call the AMF Information Centre at 1 877 525-0337 or look them up in the Register of firms and individuals authorized to practise.
- Find out more about the investments you’re being offered.
- Don't invest if the prospectusA prospectus is a detailed information document that a company must prepare to be able to sell securities (such as shares) to the public.
It must provide full, true and plain disclosure of all material facts likely to affect the value or market price of the security in question. or audited financial statements are not available, even if you are promised that they will be "available soon”.
- Don't act based on “privileged” informationPrivileged information is information that, if made public, could influence the price of a share traded on an exchange. Buying or selling shares using privileged information is illegal.. That's illegal, and the information is generally not true.
- Request written confirmation of any information given to you verbally.
- Ask questions and get clear answers. If the answers are unclear or are not forthcoming, don’t invest.
- Get a second opinion and do your research, even if the “tip” comes from someone you know. Well-intentioned persons may themselves be fraud victims.
- Read a form carefully before signing it.
- Take some time to think before you invest. Never make impulsive decisions.
Documentation and tools
- AMF publication : Choosing Investments (jpg - 28 KB)This link will open in a new window
- AMF publication Choosing an Investment Dealer or Representative (jpg - 32 KB)This link will open in a new window
- Trust must be earned! (jpg - 79 KB)This link will open in a new windowUpdated on 9 October 2014
- Red-flagging Financial Fraud (jpg - 65 KB)This link will open in a new windowUpdated on 28 November 2013
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