The ASC’s top investment risks in 2020 – part one

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Net Patrol International Inc.  Data Investigation and Forensic Services
Bankruptcy and Insolvency Trustees

Calgary (January 9, 2020) – The general rule, if something seems too good to be true, it probably is, does still apply in 2020, especially when it comes to investments. The Alberta Securities Commission (ASC) issued a warning about the top investment risks in the new year. The ASC’s enforcement division identified six untrustworthy investments based on investor complaints, ongoing investigations, and current enforcement trends: unscrupulous marketing, exploiting a bad economy, new and emerging industries, affinity fraud, unregistered individuals selling securities, and promissory notes. In part one, we focus on get-rich-fast schemes. Part two addresses the illegal fraud schemes on the list of ASC’s top investment risks in 2020.

Unscrupulous marketing

Scammers are exceptionally good at selling people their fraudulent products. They know what to say so people get interested and want to be a part of their get-rich-quick-schemes. They will say ‘this is an exclusive opportunity’, or ‘ this is how the wealthy make their money’, however, there is a relationship between risk and reward. Generally, the higher the potential reward, the higher the risk.

‘The number of complaints relating to private, high-risk investments that are marketed as low-risk are on the rise in Alberta,’ according to the ASC. Any investment promising high returns that are marketed as low-risk should raise a red flag.

Read more: The ASC’s top investment risks in 2020 – part two

Exploiting a bad economy

Scammers who practice unscrupulous marketing often target those who are feeling financial pressure. For instance, struggling economy scammers prey on those recently laid-off or otherwise affected by a currently bad economy.

The ASC warns that ‘a major life change can trigger stress about finances and the future, which can affect decision making.’ This situation makes people more vulnerable to scammers and what they are offering. Hence, if financially struggling people are advised to cash out traditional retirement savings plans for an investment with the promise of higher returns, they are more likely to comply with the fraudulent offer regardless of tax implications and the added risk of the ‘investment’.

New and emerging industries

Some investors are always chasing the next big thing. They speculate on trends and bet on industries or products with limited or no information and history of success. The reason why people are investing in new and emerging industries is that they are hoping to be among the first to capitalize on the potential growth and to gain high returns in case their investment will be popular in the future.

However, scammers try to capitalize on this willingness to give money in an environment where it is easier to spread false information. This is why, the ASC advises investors to do their due diligence before getting involved in a venture: ‘While new industries may give rise to a range of exciting investment opportunities, it is important to understand the risks associated with the business before investing your hard-earned money.’

Read more: Financial commission warns against fraudulent offers for high-risk crypto asset investments

Despite the higher risk of new market investments such as evolving laws and business models, the regulatory agency in Alberta recognized a recent increase in scams related to cannabis, foreign exchange and, especially, cryptoasset investments.

The provincial regulatory agencies provide online tools and information for investors such as the ASC’s or Ontario’s Anyone who has become a victim of a scam is encouraged to report the incident to the public inquiries offices.