Frauds and scams
Frauds and scams can happen to anyone, including investors. Fraudsters will go to great lengths to get between you and your hard-earned money.
Some common types of scams:
Extortion is when someone threatens, coerces or blackmails you into providing money or confidential information that they use can use for their gain.
Affinity fraud is a form of fraud in which fraudsters approach potential victims through a group or community organization that they belong to. These groups could be religious groups, ethnic groups, or even workforce communities like unions or the military.
A fraudster may contact you through social media and dating sites or via email and convinces you to enter a virtual, online relationship so that they can gain your trust and affection. When the fraudster gains your trust they will ask you for money or say they can help you to invest.
Scammers promise high returns in crypto asset investments. You may have to open an investment account with a crypto trading platform. When you check the account there is no money or crypto asset investment. Remember if something sounds too good to be true, then it probably is too good to be true.
Identity theft is when someone uses your personal information to commit fraud. They may use your personal information – name, social insurance number, credit card number or other information to take money from your bank account, use your credit card, open an account or apply for a loan or credit card – without your knowledge.
On their own, exempt securities aren’t scams. But some scammers pitch fraudulent investments as “exempt” securities. They may tell you that they will make an exemption for you to participate in a special deal. Be suspicious if you get an unsolicited phone call about a hot tip on a promising business that is about to “go public” and contact your local securities regulator to check.
Forex ads promote easy access to the foreign exchange market, often through courses or software. But foreign exchange trading is dominated by large, well-resourced international banks with highly trained staff, access to leading-edge technology and large accounts. It’s extremely difficult to beat these professionals.
This scam promises huge profits if you send your money “offshore” to another country. Usually the goal is to lower or avoid your taxes, but you could end up owing the government money in back taxes, interest and penalties. Also, if something goes wrong, you likely won’t be able to take your case to civil court in Canada.
Phishing happens when a stranger poses as someone trustworthy to get your private information, such as your passwords or banking information. It may come in the form of an email or message asking you to click a link or attachment. They may pose as a financial institution or government agency. The best way to deal with suspicious messages like this is to delete them.
These schemes recruit people through ads and emails that promise you can make big money working from home or turn $10 into $20,000 in just weeks. Or, you may be given the chance to join a special group of investors who are going to get rich on a great investment. The invitation might even come from someone you know.
Scammers contact you to promote a low-priced stock. What you don’t know is that the scammer already owns a large amount of this stock. As you and other investors buy shares, the value of the stock rises. At the peak price, the scammer sells their shares and the value of the stock plummets, leaving you with worthless stocks.
In this scam, the victim is persuaded to pay money up front in order to take advantage of an opportunity with the promise of receiving significantly higher returns for a good or service. But the scammer takes the money and the victim never hears from them again. Investors who have lost money in a risky investment are often targeted.
Knowing what to look for can help you avoid losing money to fraud.
Red flags of fraud
Be suspicious if someone you don’t know contacts you about an unsolicited offer or opportunity. Ask yourself why that person would contact you.
Don’t respond or click on any links or attachments that you receive. Verify who you are dealing with before you provide any information. Look up the phone number for the company and call to confirm that the person actually works for the organization.
If someone promises you an investment that has high returns with little or no risk, the investment that they are offering might be a scam. Generally, the higher the potential return of an investment, the higher the risk of that investment.
The sources of “hot tips” or “insider information” don’t have your best interests in mind. Think about why they’re offering you tips, and how they benefit by telling you about them. If it is really inside information about a public company, it would be illegal to act on it under insider trading laws.
Fraudsters frequently use high-pressure sales tactics to quickly get your money and then move on to other victims. Be very cautious if you are asked to make a decision right away or are presented with a limited-time offer.
Before you invest, check the registration of the person offering you the investment. In general, anyone selling securities or offering investment advice must be registered with their provincial securities regulator.
Avoiding investment fraud
4 ways to avoid investment fraud
Before you invest, get a second opinion from a registered advisor, lawyer or an accountant.
Contact the OSC to check registration of the person selling securities or offering investment advice.
Take the time you need to make an informed decision.
Research the investment to understand how it works, the risk and any fees. Make sure it fits with your financial goals and your other investments.
Protecting your information
Learn how you can keep your financial information safe to avoid financial fraud and identity theft.
Checklist to protect your personal and financial information
Keep your personal identity information private, including your social insurance number, date of birth, driver’s license number, etc. Only carry the identity documents you need in your wallet.
Store personal documents in a secure place.
Never reply to an email or phone call asking you to provide personal information.
Frequently clear your logins, passwords and browser history, especially when using a public computer or network.
Keep your anti-virus software up to date and regularly change your passwords.
Set better passwords using a combination of letters, characters and numbers. Or, use a password manager that will generate strong passwords that are securely encrypted.
Enable multi-factor authentication (MFA), if available. MFA adds two or more identity checking steps to user logins before you are granted access. Learn more.
Use secure and trusted websites. Learn to spot fake websites and verify legitimate ones. Learn more.
Review your bank and credit card statements, at least monthly to look for mistakes or unauthorized transactions. Report any issues to your financial institution right away.
Shred documents you don’t need such as receipts, bank statements, ATM receipts, cheque stubs or credit card statements.
Check your credit report and score annually.
Report lost or stolen identification, debit cards or credit cards to your financial institution and Canada’s credit reporting bureaus immediately.
Helpful resource kits
Get more resources to help you protect your money.
Check before you invest
One of the best ways to help avoid investment fraud is to verify that any person offering you an investment or investing advice is registered to do so.
In general, anyone selling securities or offering investment advice must be registered with the securities regulator in the provinces and territories where they offer their services.
Registration helps protect investors because investment regulators, like the Ontario Securities Commission, will only register people or companies that are qualified to sell investments or offer advice to the public.
What’s required to be registered?
Individuals must meet certain education and experience requirements in order to be registered. These requirements depend on what category of registration an individual is applying for. Each category has different requirements and permits different activities.
Firms and individuals must conduct themselves with integrity, which includes honesty and good faith, particularly in dealing with clients. Individuals are subject to background and police checks and firms and all registered individuals are required to renew their registration each year.
Firms must maintain solvency by meeting the capital and insurance requirements required to carry out their obligations on a daily basis. Registration also doesn’t guarantee that you’ll make money or that you won’t lose money.
Checking registration is quick and easy to do. Use the National Registration Search tool to check the registration status and review the discipline history of any person or business in the investment industry.Check the registration of a business or individual now