Investment fraud is easier to recognize when you know what it looks like. To protect your money and achieve your financial goals, it’s important to stay ahead of scammers.
You can minimize the risk of falling victim to investment frauds by spotting common red flags, including:
High returns with low risk.
In general, higher-risk investments offer higher potential returns, and lower-risk investments offer lower returns. This is known as the risk-return relationship. Be wary of someone promising exceptionally high returns with little or no risk.
Hot tip or insider information.
Sources of these tips don’t have your best interests in mind. Think about why they’re offering you information tips and how they stand to benefit. Keep in mind that acting on insider information — undisclosed material information — about a public company is illegal.
Pressure to buy now.
Fraudsters frequently use high-pressure sales tactics to get your money and then move on to other victims. If you’re asked to make a decision right away, it’s likely not in your best interest.
Seller is not registered. Before you invest, check the registration and background of the person offering you the opportunity. In general, anyone selling securities or offering investment advice must be registered with the securities regulator in your province.
Make sure you always understand what you’re investing in.
Don’t be afraid to ask questions and get a second opinion. If the explanation is too complex or technical, or if you feel pressured to buy on the spot, you should be cautious and only make a decision that you’re comfortable with. If you cannot afford to lose the money you are investing, do not invest it under pressure.
To avoid investment fraud, check the registration of the person or company offering you investment products or services. The Ontario Securities Commission administers the registration of firms and individuals who sell securities and provide investment advice in Ontario. (NC)