The Alberta Securities Commission (ASC) has released a list of top investment risks in hopes of helping Albertans avoid falling victim to scams in 2021.
“We want to protect people from the scammers and fraudsters that unfortunately exist out there,” said Hilary McMeekin, director of communications and investor education with ASC.
McMeekin said fraudsters capitalize on people in any way they can, even if that means committing scams during the pandemic.
“They prey on our vulnerabilities,” she said. “We have seen an increase in activity when it comes to fraud services or products around the pandemic.”
In early January, the ASC released a list of six tips that McMeekin said will “arm Albertans with timely information to stay vigilant and protect their finances as we enter 2021.”
The first red flag on the ASC’s list involves investments related to COVID-19. According to an ASC press release, a common way fraudsters take advantage of global events is through “pump-and-dump schemes,” which promise an opportunity to invest in new products or services that will prevent, detect or cure COVID-19 – or otherwise aid in the fight against the virus.
These pump and dump schemes usually involve artificially inflating the price of a penny stock shell company through issuing false and misleading positive statements, according to the release. The price of the stock rises as people invest. However, the wrongdoers cash out their stock at a high price before the truth is revealed, and the price of the stock then falls dramatically, leaving investors with nothing.
Another scam ASC warns about is any investment that promises great expectations. According to McMeekin, the ASC has seen an increase in situations where investment is encouraged with the promise of high returns resulting from a proposed deal involving a letter of intent.
“Proposed deals can fall through, so if it’s being promoted as a sure thing, investors should be wary,” she said.
Affinity fraud, according to McMeekin, is another scam people should be on the lookout for this year. McMeekin said affinity fraud happens when victims are introduced to scams by someone they know, such as family members, friends or co-workers.
“Fraudsters will often target ethnic communities, religious organizations, social clubs or professional groups, taking advantage of the trust and relationships that exist within,” she said. “The fraudster becomes part of – or pretends to be part of – the community, flaunting their success or wealth and often enlisting unsuspecting ambassadors to spread the scheme to make it seem credible. Friends and family may unknowingly fall victim and encourage others to invest, too.”
Also on ASC’s list is a scam that promises quick profits by trading stocks at home. McMeekin said a lot of trouble can be avoided by just properly researching these promises.
“Research the company, research whatever the investment is for,” she said. “Really look into and understand what that product or service is all about. Learn as much as you possibly can.”
Particularly during a recession or pandemic, people can be interested in earning additional income. According to McMeekin, taking the time to research the validity of various money-making opportunities can save people a lot of hardship down the road.
“Take that time,” she said. “Our hard-earned money is worth taking the time to do the research.”
Quite often, McMeekin said, when scams are reported, the companies or persons involved have not been registered with ASC.
“The first question isn’t ‘are you registered?’ but it should be,” she said. “If they are not registered, that is a red flag.”
The ASC has a website, checkfirst.ca, which McMeekin said can help people find out if companies they plan on dealing or investing with have taken necessary steps to register with the commission.
“It’s a website that is full of unbiased and free resources for investors,” she said. “No matter what stage of investing someone is in, it can be helpful.”
Jordan Stricker, AirdrieToday.com
Follow me on Twitter @Jay_Strickz
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