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5 Signs of Investment Fraud

If it sounds too good to be true, it probably is. Most of us know and swear by this saying, but when it comes to financial investments, we toss the sentiment out the window. When money is involved, we tend to throw caution to the wind and sometimes forget to use common sense.

It’s easy to fall victim to investment scams, especially those that sound legitimate and offer attractive returns. How can you tell if you’re being played? Be on the lookout for these five signs.

1. They’re Unregistered

Before making any type of investment, check the Canadian Securities Administrators’ (CSA) National Registration Search to see if they’re registered.

While you’re at it, check the CSA’s Disciplined Persons List to see if they’ve been in trouble with a securities regulator.

Anyone offering investment advice or selling securities must be registered with their provincial securities regulator.

2. You Feel Pressured to Make an Investment

According to the Meyer Wilson law firm, one of the earliest signs of investment fraud is an aggressive promoter who says the investment is only available for a limited time. It’s common for scammers to use high-pressure sales tactics to get their victims to take the bait and hand over their money.

If you’re being pressured to make a decision right away or you’re presented with a “limited time offer,” the promoter is probably not acting in your best interests.

Scammers know that they’ll be caught if you have time to look into their offer.

3. It’s a No Risk, High Reward Investment

High-risk investments have the potential to offer higher returns, and low-risk investments have the potential to offer lower returns. A low-risk, high-reward investment is rare – and there are never any guarantees.

In fact, it’s impossible to guarantee a return when it comes to investing.

If you’re being told that you’ll see tremendous returns with little-to-no risk, run the other way.

4. You’re Told to Keep it a Secret

If someone presents an investment opportunity they claim is a secret, think twice about moving forward. Scam artists know that if they ask you to keep the opportunity to yourself, your friends, family and financial advisers cannot see through the scam.

This is a common tactic used in offshore investing scams that are touted as being tax-free. Remember that you may be able to defer taxes, but you can never avoid them. And if you send your money overseas, there is no guarantee that you will get it back.

5. All of Your Friends are Doing It

Scam artists will commonly target tight-knit groups of people, like religious and ethnic groups. They work their way into the group and befriend members in order to defraud them.

The tactic plays on our instincts to trust our friends and family, and taps into our fear of missing out on an opportunity. With these types of scams, victims are often introduced to the investment through friends and family members – people they trust.

Anyone can become a victim of investment fraud. Look for these five red flags if you’re being introduced to a new investment, and always check to make sure the person or organization is registered before investing.


David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.