In this post, I am sharing a few of the questions from the sessions, and my answers to the attendees.

Is it okay for our pension fund to invest in private companies? 

This is a great question because it demonstrates that people are paying attention to their retirement savings. It came up when we discussed the things that retail investors need to look out for if they are considering investing in a private company.

Generally, large funds that handle public service workers’ pensions (I was talking to retired teachers) are “accredited investors”, which allows them invest in private placements. If you have any questions about your fund, contact your pension provider.

Is it better to invest in a private start-up or a public venture company? 

I began my answer by stating that we do not give advice about particular investments or investment strategies. I went on to say that, it is up to the individual investor to determine their risk tolerance and to assess the investment. You do this by researching the company, its management, and the viability of its product or service.

InvestRight offers information on how to do your research when investing in both private and public companies. Getting help from a registered advisor is also a good way to assess whether or not a particular investment is suitable for you and your portfolio.

What happens when I complain or report suspicious activity to the BCSC?  

You can expect to speak with our inquiries staff first. They handle all incoming phone calls, e-mails, and online reports. They document the correspondence and obtain more information, if necessary. Complaints then go to the BCSC’s case assessment branch. This branch determines where to refer a complaint (eg. another agency, a BCSC investigator, another BCSC division, etc.). If there is insufficient evidence, they will close the file.

If the BCSC investigates a complaint and finds misconduct, it can take regulatory action. This type of action can result in market bans or fines. The Enforcement section on the BCSC’s website lists our current cases, and the CSA Enforcement Report shows cases from the past year.

The BCSC also has a criminal investigation team that can refer cases to Crown Counsel if evidence supports a criminal charge.

If you have any other questions, feel free to leave a comment.

Below is a summary of a few of the April 2013 enforcement cases.

BCSC Settlement Agreement – Quantum Financial Services (Canada) Ltd.  

Quantum admitted in a settlement agreement that it failed to address repeat deficiencies in the area of Know Your Client procedures, Policy and Procedures manual and Compliance Officer performance and oversight.

In 2005, BCSC staff identified several deficiencies during a compliance examination. Subsequent examinations in 2008 and 2010 found similar deficiencies. There was no evidence that the deficiencies negatively impacted Quantum’s clients and a 2011 examination found the company had corrected the deficiencies.

Quantum agreed, in the settlement agreement, to pay $50,000 and to engage a consultant (approved by BCSC staff in advance) to review Quantum’s ongoing response to the deficiencies on a quarterly basis for a period of one year. 

IIROC Sanction Decision – Marco Myatovic and Doreen Lowe  

An IIROC Hearing Panel fined Myatovic $500,000 and issued a permanent ban on approval in any capacity. The panel fined Lowe $100,000 and issued a three-year ban on registration in any capacity.

The panel imposed these sanctions after finding in an earlier July 2012 decision that Myatovic and Lowe failed in their role as gatekeepers by facilitating manipulative or suspicious trading activity in several client accounts.

IIROC Settlement – Daniel Edward Smith  

An IIROC Hearing Panel accepted a settlement agreement between IIROC staff and Smith. Smith admitted that he engaged in personal financial dealings with his client without his firm’s knowledge.

Smith agreed, in the settlement agreement, to pay $50,000 and to pay costs of $5,000. In addition, Smith agreed to a four-year suspension of registration from IIROC in any capacity.

Access to more cases 

BCSC  

Notice of hearing: Wilhelmus (William) Kocken, Matthew Ball and Bralorne Gold Mines Ltd. 

MFDA  

MFDA hearing panel rejects settlement agreement – Corey McPherson 

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

The trend toward self-directed investing gained momentum during the financial crisis when people felt their financial advisor was not meeting their needs. Going at alone is also attractive to younger investors who want more control, convenience, and lower fees.

Even though investing self-directed investing is convenient, it takes a lot of work and knowledge. Before deciding to take over your portfolio or going at it alone, you should ask yourself the following questions.

Do I understand the difference between risk and return? 

Our research tells us that many older Canadians (50+) don’t understand the difference between risk and return – when you chase higher returns, there is a greater risk of you losing your investment. People also didn’t understand what kind of return to expect from the markets. If you don’t have a solid understanding of these investment basics, you should probably consider looking for an advisor to help you set up and monitor your portfolio.

Do I understand investment products? 

If you don’t know what different investment products are and how they function, you should reconsider managing your own portfolio. There are many different investment products out there, and it’s good to have a solid understanding of how they work before you start trading stocks, bonds, etc. Also, people get caught up in trends, which leads them to purchase products that can hurt their long-term financial goals.

Do I understand how to trade securities?  

Like understanding investment products, it is important that you understand how different types of trades work before you start trading securities. There are also different types of accounts and positions you can take when you trade.

Am I an emotional investor? 

If seeing your portfolio take a dive drives you to trade, consider whether you are ready for the stress of managing your own investments. Furthermore, trading fees from moving back and forth between products can eat into your returns. To manage money well, you need to be able remove emotion from the equation.

Do I like reading reports and analysis? 

Reading materials about the investment products you purchase is key to ensuring your portfolio is on the right track – you should do this even if you have a financial advisor. This takes time, and requires some knowledge about fees and rates of return. You will want to do this on a regular basis to make sure you have the right mix of investments in your portfolio.

I don’t think I’m ready to invest on my own. Now what? 

If you have money to invest, you will want to seek out a registered financial advisor. Before you pick an advisor, you need to know what you want from an individual, understand the type of service they provide, and check the person’s background and registration. Our Guide to Investing will help walk you through this process.

Let us know if you have any questions or observations by leaving a comment for us below.

The Canada Revenue Agency (CRA) publishes a webpage with the top five tax scams, warning that these are illegal schemes that could have serious consequences if you get involved. In addition to fees you may pay to the scam artist, you could also end up having to pay tax penalties or be charged with tax evasion.

Coming in at number two on the CRA list is what we call an “RRSP unlocking scheme”. In this scam, promoters promise you immediate, tax-free access to assets in your “locked-in” Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), or retirement income plan. In addition, these schemes sometimes promise excellent returns on the remaining investment or significant tax benefits.

In the end, the schemes all have the same effect – you suffer significant investment losses, on top of serious tax and pension repercussions. For more on this type of scheme, you can read our Investor Alert. It contains links and information to help you detect and report these schemes.

Interest rates and your bond portfolio 

Recently, the Financial Industry Regulatory Authority (FINRA) in the US issued an Investor Alert highlighting the sensitivity of bonds to an increase in interest rates. The Alert focuses on “duration” – a measure of bond price volatility. The Alert explains what the duration number on a bond means, and how it correlates to changes in interest rates.

Even though interest rates are currently holding in Canada and the US, the FINRA Alert points out those rates are at historic lows. The Alert explains how a rise in interest rates could have a significant impact on the values of outstanding bonds – those with a high duration number. Learning more about how interest rates affect certain bonds will help you ask your advisor the right questions about the bonds in your portfolio.

CSA implements new disclosure requirements for dealers and portfolio managers 

On March 28, the Canadian Securities Administrators announced the implementation of new requirements aimed at providing investors with essential information about the costs and performance of their investments. The new amendments will take effect on July 15, 2013, and will be phased in over the next three years.

Once they are all implemented, you can expect new disclosure that includes:

• the services and product costs you can expect to pay when you open an account;
• an annual summary of fees and charges you paid to a firm;
• transaction costs and deferred costs, at the time of a transaction;
• your contribution amount and its worth as of the report date;
• annual and historic deposit and withdrawal information; and,
• returns and losses for your account over specific time periods.

Watch our Informed Investing section for updates on when they come into effect.

The MSC issued the alert because of its concern that Manitobans may be involved in the scheme. It was the third alert the MSC sent out in a month, and the second focusing on a high-yield investment program (HYIP). BCSC staff added Felmina Alliance to the Investment Caution List after the MSC issued its alert. The Ontario Securities Commission (OSC) also warned people not to invest with Felmina Alliance in mid-March.

Often when HYIPs receive public attention from securities regulators, their websites go down – we saw this with Profitable Sunrise. This is not the case with Felmina Alliance. Its website is still active at the time we are publishing this blog post.

If Felmina Alliance, or any other non-registered entity, approaches you to invest, report it to your local securities regulator immediately. You can check a firm’s registration status on the Canadian Securities Administrators (CSA) website. 

BCSC adds Corolla Financial to Investment Caution List 

In mid-March, BCSC staff put Corolla Financial on the Investment Caution List after learning the firm solicited a BC resident to invest.

On its website, Corolla Financial states that it provides financial advisory and brokerage services to personal and corporate clients. However, Corolla Financial is not registered in BC to trade in, or advise on, securities or exchange contracts.

Furthermore, the Danish Financial Supervisory Authority and the Financial Services and Markets Authority of Belgium issued warnings about Corolla Financial.

The BCSC urges British Columbians to exercise caution when dealing with firms that are not registered to trade or advise in BC.

More warnings and alerts from securities regulators 

• On March 12, The OSC warned investors about Hanalex Services Ltd., doing business as TradeQuicker.com.
• On March 5, the MSC issued an Investor Alert on Accredited International/ Accredited FX, after the commission became aware that a Manitoba resident received a cold call from the purported Forex dealer. 
• On Feb. 13, 2013, the Nova Scotia Securities Commission tweeted a warning that Strategic Investments from Chicago was soliciting Nova Scotians to invest.
• The Autorité des marchés financiers ordered David Kam to stop soliciting investors via the Internet. It also warned investors about the website, leaderoption.com and an entity going by the name of Scorpion Performance, regarding phone solicitations into BC, Saskatchewan, Manitoba, and Québec.  

You will find more information on these alerts on the CSA website, and the Ontario Securities Commission’s Warning List.  

In March 2013, the BCSC released one settlement decision. The Commission also issued an Investor Alert on Profitable Sunrise and another on high-yield investment programs.

BCSC Settlement Agreement – Symmetry 2 Mortgage Investment Corporation   

Symmetry 2 Mortgage Investment Corporation admitted in a settlement agreement that it failed to meet its regulatory filing obligations and illegally distributed securities. From 2003 to 2011, Symmetry distributed securities with a value of approximately $13.9 million to 126 investors without filing the required exempt distribution reports. 

Of the claimed exemptions, all were applicable except for seven investors (accounting for $550,460) who were offered rescission.

Symmetry agreed to pay $10,000 to the commission after cooperating fully with commission staff.  Symmetry had no prior regulatory or disciplinary history.

IIROC’s Enforcement Report  

Last month, IIROC published its Enforcement Report for 2012, which highlights its work of enforcing IIROC’s member conduct and market integrity rules.

This inaugural report provided a high-level overview of IIROC’s role in domestic securities regulation and enforcement. It outlines IIROC’s strategic enforcement priorities and initiatives and provides summaries of its most noteworthy cases illustrating IIROC’s focus on cases involving seniors and suitability.

In addition to the news release linked above, the report’s homepage contains a video highlighting IIROC’s enforcement efforts, and a graphical representation of the investigations and prosecution numbers in each province. You will also find the full report and a link to an enforcement statistics page.

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

Be Fraud Aware
Hosted by the Burnaby Library
April 15 6:30 pm – 8:00 pm
6100 Willingdon Street
The BC Securities Commission and the Better Business Bureau will talk about the top ten scams in BC including investment scams.
Free admission
To register call 604-436-5400

Grand Forks 

Be Fraud Aware seminar
April 18
Private event

Surrey
Focus on Seniors Forum
Hosted by the City of Surrey
April 20 10:00 am- 3:00 pm
Fraser Heights Recreation Centre 10588-160th St. Surrey
This event is free for all seniors - focusing on a Korean speaking audience.
This forum will raise awareness of issues affecting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.
Lunch will be provided. Lots of great prizes!
Seating is limited, so please register for Course # 4323338 at:
• 604-501-5100 (8:30 am- 4:30 pm) Monday- Friday)
• Any City of Surrey ‘s Community or Senior’s Centres
• www.surrey.ca/register

Victoria 

Be Fraud Aware
April 22
Private event

Kamloops 

Be Fraud Aware
April 24
Private event

Kamloops 

Be Fraud Aware
April 25
Private event

Surrey 

Be Fraud Aware
April 25
Private event


We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors’ organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen
Program Manager, Outreach
Communications & Education
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

 

CSA Enforcement Report  

Last month, we published the CSA Enforcement Report with our colleagues from across Canada. We introduced the report a few weeks ago. In this blog post, we are introducing a tool and some information that our BC readers may find interesting.

If you are interested in BCSC enforcement cases over the past year, you can go to the concluded cases database on the CSA Enforcement report website, choose 2012, and search for BC as the province. If you do this, you will find that the BCSC concluded 22 enforcement cases last year. In the same database, you can choose to see particular types of cases from across the country. You can link to the actual decision or settlement for each individual case directly from the concluded cases database.

If you do not want to look through the database, you may find the Case Highlights section of the report interesting. Here you find a discussion of a few cases under each type of misconduct from different jurisdictions across the country. It will give you a flavour for the types of cases all provinces have seen over the past year.

We’ve included a summary of a few of the February 2013 enforcement cases below.

IIROC Liability and Sanction Decision – Jordon Rocco Steel  

An IIROC Hearing Panel fined Steel $100,000, ordered him to pay costs of almost $8,500, and issued a permanent ban on approval in any capacity. The panel imposed these sanctions after finding that Steel had misappropriated approximately $40,000 from two investment advisors for whom he worked as a registered assistant.

IIROC Sanction Decision –David Hoang  

An IIROC Hearing Panel fined Hoang $25,000. In November 2012, the panel panel found that Hoang failed to attend a second interview and give additional information in respect of an investigation being conducted by IIROC.

Access to more cases 

IIROC case 

Withdrawal of Allegations – Mark Wiltshire 

MFDA case 

Suspension of Securities Related Business – Patricia Marva Cuthbert 

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

Today, we launched a new video series ‘David vs. the Be Fraud Aware App’ aimed at demonstrating the power of the ‘Be Fraud Aware’ mobile app in spotting potential investment fraud, protecting against it and reporting it.

The ‘David vs. the Be Fraud Aware App’ videos, found on YouTube and befraudaware.ca, includes three short clips demonstrating the ability to use the Be Fraud Aware mobile application for iPhone and iPad to access real-time news, information and on-the-go protection against fraud. The videos depict David, a scam artist, relaying exciting information about suspect investment opportunities, while simultaneously showing navigation through the application to expose his offer as fraudulent. The use of the app renders David powerless.

We are also encouraging people to use the InvestRight ‘Guide to Investing: the private placement market for retail investors’. The guide, which we published last month, explains the difference between public and private markets, how the private market works, and points out the risks of business failure and/or investment fraud that interested parties should be aware of.

The InvestRight ‘Guide to Investing’ and video series join a host of already existing BCSC resources that combine entertainment and education to protect the public, including befraudaware.ca, the Be Fraud Aware app, additional videos, quizzes and more.

During Fraud Prevention Month and beyond, the BCSC remains committed to helping these at-risk individuals stay informed with timely investor education and investor protection news, alerts about scams happening in British Columbia, and unbiased information on new investment products or emerging fads.

Watch Twitter for the hash tag #BeFraudAware during Fraud Prevention Month for news and tips on how to avoid investment fraud.

Coquitlam  

Be Fraud Aware seminar
March 5
Private event

Nanoose Bay  

Be Fraud Aware seminar
March 6
Private event

Nanaimo  

Be Fraud Aware seminar
Hosted by St Phillips Anglican Church
March 9 9:30 am – 1:00 pm
St Phillips Theatre 1797 Cedar Road Nanaimo

This is a half-day Financial Awareness workshop with three presentations.
• Be Fraud Aware- BC Securities Commission
• Financial Savvy and the taxman – Island Savings Credit Union
• Leaving a Legacy – Estate Planning- Gary Richardson, Notary Public
Coffee, refreshments & light lunch will be served. Door prizes! 

To register contact:
Diana Slater, Rectors Warden 250-722-3455 rectorswarden@stphilipcedar.ca
Marianne Lunn 250-245-1356 marianne_lunn@hotmail.com

Surrey  

Be Fraud Aware seminar
March 13
Private event

Vancouver
Be Fraud Aware seminar
Hosted by Tapestry at Arbutus Walk Senior Residence
March 14 1:00 pm – 2:00 pm
2799 Yew Street Vancouver

The BC Securities Commission and the Better Business Bureau will talk about the top ten scams in BC including investment scams.
Free admission for seniors and their families
Refreshments will be served afterwards
To register call 604-736-1640

Surrey  

Focus on Seniors Forum
Hosted by the City of Surrey
March 16 10:00 am- 3:00 pm
Fleetwood Recreation Centre 15996 - 84 Ave. Surrey 

This event is free for all seniors - focusing on a Punjabi speaking audience.
This forum will raise awareness of issues affecting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.
Lunch will be provided. Lots of great prizes!

Seating is limited, so please register for Course # 4324886 at:
• 604-501-5100 (8:30 am- 4:30 pm) Monday- Friday)
• Any City of Surrey ‘s Community or Senior’s Centres
• www.surrey.ca/register

Chilliwack  

Be Fraud Aware seminar
March 19
Private event

North Vancouver
Be Fraud Aware seminar
March 20
Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors’ organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen
Program Manager, Outreach
Communications & Education
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

 

The Canadian Securities Administrators’ (CSA) 2012 Investor Index revealed that 60 per cent of respondents with a financial advisor have never completed any form of background check.

Being an informed investor is the best defence against investment fraud. A simple first step in protecting yourself is checking the registration of any firm or individual selling securities or offering investment advice. You can do this using the National Registration Search.

In terms of investor protection, registration status or category is more important than a title because it tells the investor what types of products or services a firm or individual is qualified to sell or provide advice on.

Registration is designed to help protect investors because Canadian securities regulators register firms and individuals that meet specific qualifications and standards. 

To raise awareness around registration, the CSA is encouraging investors to participate in Check Registration Day, March 26, 2013. Here’s how:

• Go to www.securities-administrators.ca and click National Registration Search, to ensure your investment individuals or firms are registered in your jurisdiction.
• Or, contact the BCSC at inquiries@bcsc.bc.ca or 1-800-373-6393 to verify registration.

If you discover the person you are dealing with is not registered, contact BCSC Inquiries immediately.

I’ll start with our comment policy first, and then I’ll deal with why the question is a good topic to discuss at this time of year.

We could not publish the comment, because it asked whether an investment in a particular company was “safe”. We do not give investment advice, nor do we discuss the viability of investment products. For obvious reasons, we do not publish the names of companies in this context.

The person asked us if a promised 10% return in a private real estate investment is safe?

The simple answer is no. If you invest, you are taking on some kind of risk no matter the investment. On this blog and in our seminars, we always tell people that the higher the return an investment offers, the higher the risk. Today 10% is a high return on an investment. These days, many interest-bearing GICs, which are low-risk investments, are offering about 2%.

To this answer particular comment, we would add that investing in private companies – real estate or otherwise – can be a high-risk proposition.

We recently published the InvestRight Guide to Investing: the private placement market for retail investors. This Guide talks about how the private placement market differs from the public capital markets (equity exchanges, bond markets, etc.). It also explains how the private placement market works, and it sets out the risks of business failure and the risk of fraud in this marketplace. It is essential reading for any retail investor looking at investing in a private company.

The question is timely because it is RRSP season.

Investors may come across private real estate funds that are RRSP eligible in their research. Just because an investment qualifies for an RRSP, does not mean you should (or can) purchase it. There are rules companies must follow when offering private placements to retail investors. You will find these rules explained in the Guide.  Furthermore, a fund must apply to Canada Revenue Agency and obtain a letter stating it is RRSP eligible. Before investing, ask the fund to provide you with a copy of the letter.

Finally, there is an Investor Watch on the topic of real estate investing on our website. It explains the different types of real estate securities available to investors and the risks involved.

Securities regulators have released their fifth annual report about enforcement activities across Canada with a focus on the fight against fraud.

The Canadian Securities Administrators’ (CSA) 2012 Enforcement Report outlines how securities regulators work to protect investors and the integrity of Canada’s capital markets. The 2012 report separates fraud cases into its own category whereas previous reports included fraud in other market misconduct. 

Last year, CSA members concluded cases against 322 individuals and companies, including securities fraud cases that involved 66 individuals and companies. Fines and administrative penalties totalled nearly $37-million with more than $120-million in restitution, compensation and disgorgement. 

The CSA’s Enforcement Report is again available in HTML format, which allows users to navigate specific sections of the report quickly and easily. The report comes out in advance of Fraud Prevention Month in March, which highlights tools and resources Canadians can use to recognize and avoid investment fraud, and lets them know they can turn to securities regulators for help. 

The B.C. Securities Commission’s mobile application helps make it easier for people to identify and report investment fraud.  Recently launched as part of its three-year Be Fraud Aware campaign, the mobile app is available free from the Apple App Store for the iPhone or iPad.  

The CSA will continue to use its Twitter account to share information about the CSA and its programs, beginning with key sections of the enforcement report. People interested in investor protection or education news and programs are encouraged to follow the CSA on Twitter (@CSA_News). 

If so, then you’re thinking about taking on more risk by investing in the private placement market. Both public and private businesses in BC raise a significant amount of money in this market, which makes it an important driver of economic growth and job creation. The vast majority of those using it are investment funds and public companies. But the smaller percentage that are start-up businesses pose a high risk to retail investors.

 
Now there’s a down-to-earth guide to help you understand those risks and if they’re suitable for you.

The new Guide to Investing: the private placement market for retail investors  is free from InvestRight. It explains how the private placement market works, who can invest in it, and what to watch out for. It can help you manage the risks if you decide to invest and save you from possibly taking on more risk than you can afford.

Investing in the private placement market isn’t for everyone. Investors must qualify under strict guidelines. They also have to take on the responsibility for meticulously researching any opportunity they’re considering and carefully weigh the reasons not to invest along with the reasons to invest.

The Guide has plenty of food for thought for would-be investors in this market. Here’s just a taste.

Start-up businesses and other alternative investment types offered in the private placement market often appear attractive because they promise returns that are typically higher than those available in the public securities market. But watch out:
1. High Returns = High Risk.
2. Private market shares have strict resale restrictions and do not trade freely.
3. You could lose ALL your money.

It’s no surprise that today’s economic climate makes even conservative investors wonder how to get higher returns. If the place you’re looking is the private placement market, then do yourself a favour before you invest. Read InvestRight's private placement guide. Do your homework. And get a second opinion.  
 

BC Securities Enforcement Roundup – January 2013 

In January 2013, the British Columbia Securities Commission (BCSC) issued three notices of hearing, two temporary orders, one liability decision and one sanction decision. During January 2013, the MFDA released one liability decision and one liability and sanction decision relating to BC residents.

We’ve included a summary of a few of the cases below.

BCSC Sanctions – Ingram Jeffrey Eshun, Maisie (aka Maizie) Smith, JV Raleigh Superior Holdings Inc.  

A BCSC panel permanently banned Eshun and Smith from the province’s capital markets. The panel fined Eshun $750,000 and Smith $500,000. In addition, Eshun, Smith and JV Raleigh were ordered to pay the $5.7 million they obtained from investors as a result of their misconduct. JV Raleigh is also permanently cease traded.

In August 2012, a BCSC panel found that Eshun, Smith and JV Raleigh illegally entered into loan agreements with 81 investors, raising approximately $5.7 million. In doing so, they traded and distributed securities without complying with the registration and prospectus requirements of BC’s securities laws.

BCSC Liability Decision – Allegations against Damien Edward Reynolds dismissed 

A BCSC panel dismissed allegations that Reynolds engaged in market manipulation. The panel found that the evidence did not establish that either of Reynold’s trades resulted in, or contributed to, an artificial price for the company whose share price he allegedly manipulated.

BCSC Temporary Order and Notice of Hearing – Won Sang Shen Cho (a.k.a. Craig Cho), doing business as Chosen Media 

The BCSC’s executive director issued a temporary order and notice of hearing against Cho. The temporary order prohibits trading and investor relations activities. On January 29, 2013, the Commission, by consent, extended the temporary order until a hearing is held and a decision is rendered. The allegations in the notice of hearing have not been proven. Cho also conducted business under the names Interpower Sports and Groops Media.

BCSC Temporary Order and Notice of Hearing– Theodore Robert Everett, Leonard George Ralph, Robert H. Duke, Independent Academies Canada and Micron Systems Inc. 

The BCSC’s executive director issued a temporary order and notice of hearing against the respondents. The temporary order prohibits trading and investor relations activities. On January 29, 2013, the Commission, by consent, extended the temporary order until a hearing is held and a decision is rendered. The allegations in the notice of hearing have not been proven.  

MFDA Liability and Sanction Decision – Cheng Han Lee 

A MFDA Hearing Panel fined Lee $55,000 and issued a permanent prohibition after finding that Lee had re-invested redemption proceeds in client accounts resulting in unnecessarily incurred deferred sales charges.  Doing this allowed Lee to earn sales commissions. The Hearing Panel also found that Lee failed or refused to attend at an interview requested by the MFDA during the course of an investigation.

MFDA Liability Decision –Enzo DeVuono 

A MFDA Hearing Panel found that DeVuono failed to ensure that the investment products and leveraged investment strategy that he recommended to two clients were suitable, and that DeVuono failed to explain the features and risks of the strategy and the underlying investments. The MFDA Hearing Panel will determine sanctions at a later date.

Access to more cases 

BCSC cases 

Notice of hearing: Doris Elizabeth Nelson 

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of the steps they should take to protect themselves when investing.

Where we are this month 

New Westminster 

Be Fraud Aware seminar

February 19

Private event

Surrey 

Focus on Seniors Forum

February 23

9:00 am - 3:00 pm

Cloverdale Recreation Centre, Surrey

This event is free for all seniors - focusing on an English speaking audience.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety, and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 (8:30 am - 4:30 pm, Monday - Friday)
• Any City of Surrey Community or Seniors’ Centre
• www.surrey.ca/register 

Vancouver 

Zoomer show

February 23 – 10:00 am - 5:00 pm

February 24 – 11:00 am - 5:00 pm
 

Visit BCSC InvestRight Booth and learn how to protect yourself from investment fraud. While you are there pose for a free photo at a dream vacation spot and we’ll send you the photo after the show.

Vancouver Convention Centre, 1055 Canada Place 

Cost at the door: 1 ticket - $8 plus HST; 2 tickets - $15 plus HST; Group rate 5 - $25 plus HST

CARP members get in free with membership card

For more information go to http://www.zoomershow.ca/van/index.html 

You can download a free ticket before the show here: http://zoomershow.ca/van/img/ZoomerShow2013_webticket_12102012_sunlife.jpg

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors’ organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present, please contact:

Anne Rutherglen

Program Manager, Outreach

Communications & Education

Email:arutherglen[at]bcsc.bc.ca

RRSP season is here and there will be a lot of attention on investing in the next month. We wanted to take this opportunity to point you to an investor study by BMO that created some buzz in the media a couple of months ago.

The study revealed that almost half (47%) of British Columbians say that emotion plays a role when they make investment decisions. This figure was 6% higher than the national average of 41%.

Additionally, 63% of British Columbians say they have made an investment decision solely on impulse, and 45% say they are not confident investors.

This is worrisome news from an investor protection point of view.

In our investor education materials and presentations to the public, we often warn people about the dangers of making an impulsive investment decision. Fraudsters often use pressure tactics to try to force you into making a quick decision. If a fraudster is successful, it usually results in a person losing some, or all, of their money.

We also know that fraudsters work hard to chip away at an individual’s confidence. They often attempt to confuse investors with vague or complex investment strategies. If scam artists are questioned, they will do their best to act as if they know more than you do, and make you feel like you do not know what you are talking about.

So how do you combat these tactics?

The first step is awareness – know the fraud warning signs. You will find them on the Investor Protection section of our website.

Next, you should have a financial plan in place. If you do not have a plan, you should seek out a registered financial advisor to help you create one. Staying on top of your portfolio and planning will help you become more confident about your investments.

Finally, working with an advisor will help you take the emotion out of investing. An advisor can help you draw up a long- and short-term plan to help you meet your financial goals and needs.

This week’s post is a collection of investment fraud warnings from regulatory authorities in Canada and the United Kingdom.

Investment Fraud video from the UK 

As you may already know, we are running a province-wide Be Fraud Aware campaign that aims to raise awareness of investment fraud and encourage reporting to the BCSC. We’ve heard many good things from people around the province about the campaign, so we thought it would be a good idea to share a video from a similar campaign running in the United Kingdom.

ActionFraud, the United Kingdom’s national fraud reporting centre, released “The Devil’s in their Details - Risky Man” in partnership with the Financial Services Authority, and Financial Fraud Action UK. The YouTube video follows a young man who is listening to an investment pitch over the phone. In it, he exhibits all kinds of risky behaviour while he is on the phone listening to an investment pitch that he hasn’t researched. The video does a great job of delivering the message that if you don’t check into who is selling you an investment or what the investment is, you are taking too big a risk.

BCSC Investment Caution List 

BCSC staff added two more companies to the Investment Caution List before yearend.

Flag Resources (1985) Limited was put on the list after the BCSC issued an Investor Alert warning investors not to purchase shares of the cease traded company.

Strategic Global Investments (a.k.a SGI Traders SA) is now on the list after the company solicited a BC resident to open a commodity trading account to invest in gold options. SGI claims to be a commodity and forex broker that provides trading and advising services.

SGI is not registered in British Columbia to trade in, or advise on, securities and exchange contracts. We urge BC residents to exercise extreme caution when dealing with firms that are not registered to trade or advise in the province.

OSC Investor News: High-yield Investment Programs 

The Ontario Securities Commission (OSC) recently warned investors that High-yield Investment Programs (HYIPs) are Ponzi schemes. The alert points out that HYIP websites offer unusually high rates of return in today’s low-rate environment. It goes on to say that investing in an HYIP will likely result in the loss of all your invested funds.

In February 2010, the BCSC permanently banned Genius Funds (a.k.a. Genius Investments) from selling securities and engaging in investor relations. At the time, we published a series of blogs on Genius Funds and HYIPs. You will find the series in our Investor Communications section. The documents detailing our enforcement action are there as well.

OSC Investor Alert: Emerging World Pharma, Inc. 

The OSC also issued an Investor Alert warning investors to exercise caution if they had any dealings with Emerging World Pharma, Inc. The company’s shares traded on the U.S. over-the-market until the Securities and Exchange Commission suspended trading on Dec. 6, 2012.

Currently, OTCMarkets.com rates the company as “Buyer Beware” and is no longer displaying quotes for the security.

Today, the Better Business Bureau of Mainland BC (BBB) announced the Top Ten Scams to watch out for this year. Topping the list of financial scams is affinity fraud, a type of scam that often ends up being a Ponzi scheme.

In an affinity fraud, investors know each other because they are friends, or they all belong to an organization or group the scam artist exploited. Scam artists “sell” Ponzi schemes into this type of group because they can use the tight network to spread word about the scam, and they can keep it a secret from those outside the group.

As part of our Be Fraud Aware advertising campaign, we present a number of YouTube videos that feature David, an unscrupulous fraudster. In “Ponzi 101”, David explains how this type of investment scam works from his perspective. 

In reality, people find out about Ponzi schemes when the scam artist can no longer find new investor funds to pay previous investors – “jellybeans” in David’s explanation. When the money supply dries up, payments stop, and the people involved find out the investment was a scam.

The results are often devastating. Investors lose money, friendships, their trust in others and, sometimes, their health.

A few signs of affinity fraud are:  

• A person close to you or in your social circle is selling an investment that offers higher than market returns, with little or no risk.
• The person selling the investment discourages you from seeking independent advice.
• An investment is exclusive and available to only those in your community or organization.

There is a section on our website that discusses affinity fraud. In it, we list more warning signs, groups that are at risk, and information on what to do if you suspect someone is selling fraudulent investments to your friends or family.

You can find out more about this year’s Top Ten Scams on the BBB’s website. There are nine categories, with the top scam highlighted in each. Plus, the BBB has nominated a Scam of the Year to round it out to ten.

We work with the BBB throughout the year, making presentations across the province. Watch for announcements of these events on our social media channels and InvestRight.

Also, if you suspect an investment is a scam, contact the BCSC immediately. You can report scams to our Inquires group by calling 1-800-373-6393, 604-899-6854, or e-mail inquiries@bcsc.bc.ca.

Proposed regulatory rule changes announced today by Canada’s provincial securities regulators aim to give investors more disclosure about scholarship plans. Included in the changes, is a new form tailored to meet the needs of investors who have little or no experience purchasing investment products.

Currently, scholarship plans disclose a great deal of information through documents that tend to be long and complex – the prospectus, the financial statements, and the plan contracts. These documents provide critical information, but are difficult for less experienced investors to understand.

Central to the new form regulators are planning to introduce in May is the Plan Summary. This short, concise document provides investors with key information in a simple, accessible and comparable format. The Plan Summary is in plain language and provides important information about the potential risks and costs of investing in a scholarship plan.

“Saving for a child’s education is an important step in investment planning and these materials are aimed at providing families with information in an easy-to-understand format in order to help them make an informed investment decision,” said Bill Rice, Chair of the Canadian Securities Administrators and Chair and CEO of the Alberta Securities Commission.

Materials related to the announcement are available on the BCSC website. We have a Scholarship Plan section on InvestRight that explains the risks and costs associated to the products.

If all of the ministerial approvals go through across the country, the amendments will come into force on May 31, 2013. We plan to publish a more comprehensive blog post at this time, along with changes to our scholarship plan section.

In December 2012, the British Columbia Securities Commission issued two notices of hearing, one liability and sanction decision, one sanction decision and two settlement agreements.  The Commission also issued one decision on jurisdiction and an Investor Alert. During December 2012, IIROC released one settlement agreement relating to a BC headquartered corporate registrant. The MFDA released no decisions or settlements against BC residents last month.

We’ve included a summary of a few of the cases below.

BCSC Liability and Sanctions – Myron Sullivan II (aka Fred Myron George Sullivan), Global Response Group Corp. (GRC), and International Marketing of Canada Corp. (IMC)  

A British Columbia Securities Commission panel permanently banned Sullivan, GRG and IMC from the province’s capital markets and fined Sullivan $700,000.  In addition, Sullivan, GRG and IMC must pay to the commission the $1.74 million they took from investors.

The panel found that, between 2008 and 2011, Sullivan knowingly made false statements while promoting GRG, a BC-based company that Sullivan claimed was in possession of oil spill clean-up and fire fighting technology. Sullivan is the director, President and Chief Executive Officer of GRG.

The panel also found that Sullivan used IMC, another BC-based company, to receive money from persons who invested in GRG. Sullivan is a director and officer of IMC.

BCSC Sanctions – Brookmount Explorations Inc., Peter John Flueck and Zafer Erick Sungur  

A British Columbia Securities Commission panel permanently cease traded Brookmount, banned Flueck from the market for eight years and Sungur for five years.  The panel fined Flueck $65,000 and Sungur $45,000.  These fines must be paid before the market bans are removed.

In July 2012, a commission panel found that Brookmount, Flueck and Sungur made misrepresentations in news releases issued between February 2005 and June 2007. In doing so, the company also contravened the national mining disclosure rule.

Additionally, the panel found that Flueck and Sungur breached a BCSC cease trade order when they sold Brookmount securities in July and August of 2007.

BCSC Settlement Agreement – Melvin Zulak and Karla Ann Davis  

Zulak and Davis admitted in a settlement agreement to selling Aviawest’s promissory notes from February 2010 to April 2011 without the company having filed a prospectus, and without having an exemption from prospectus requirements.

Zulak and Davis sold the promissory notes through Zulak Financial Group Ltd, a Nanaimo-based company primarily in the business of selling life insurance. Zulak and Davis are directors of Zulak Financial.

Zulak and Davis each agreed, in the settlement agreement, to pay $6,000 to the commission after cooperating fully with commission staff.  Zulak and Davis had no prior regulatory or disciplinary history.  Both remain registered as exempt market dealers.

BCSC Settlement Agreement – Aaron Ross  

Ross, a corporate communications officer, admitted in a settlement agreement to making materially misleading statements when engaging in investor relations on behalf of Aguila American Gold Limited. Aguila is a BC-based mining company that trades on the TSX Venture Exchange.

In the settlement agreement, Ross acknowledged that he made promotional statements about Aguila that he ought to have known were misrepresentations.  He also acknowledged that he breached a requirement in a section of the national mining disclosure rule to not disclose estimates of grade, quantity, and metal content of a deposit unless it has been classified as a mineral resource or mineral reserve.

Ross agreed, in the settlement agreement, to pay $2,500 to the commission.  Ross is also banned from engaging in investor relations activities for two years.   

Access to more cases 

BCSC cases 

Decision on jurisdiction:  Erwin Thomas Speckert 

Notice of hearing: Robert Waters  

Notice of hearing: Alexander Anderson, Ken Chua, and Oriens Travel and Hotel Management Corp 

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Sidney  

Be Fraud Aware seminar

January 8

Private event

Nanaimo 

Be Fraud Aware seminar

January 9

Private event

Port Coquitlam 

Be Fraud Aware seminar

January 9

Private event

Vancouver 

Be Fraud Aware seminar

January 15

11:00 am – 12:00 pm

Revera Crofton House 2803 West 4^th Avenue

Seniors welcome!

Light refreshments will be served

Draw for prizes!

To make reservations call Anna at 604-263-0921

Sidney 

Be Fraud Aware seminar

January 22

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors’ organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

Scam artists will use your good intentions of giving to their advantage during the holidays. Be an informed investor and learn the warning signs of fraud this season with this Christmas-themed song. Sing the InvestRight carol (sung to the tune of Rudolf the Red Nosed Reindeer).

You heard of advisor misconduct

And market manipulation

Insider trading

and illegal distribution

But do you recall

The most famous scam of them all?

Charles Pietro Ponzi

Was a very cunning man

He was known in the Americas

For his money making plan

He paid the early investors

With money from the later ones

He swindled millions of dollars

Before he was caught, jailed and done

This type of investment scheme

Will be stopped if you can

Spot the fraud warning signs

And report by phone, e-mail or online

Use the InvestRight website

To help you on your way

To making good investment decisions

And protect your hard-earned money

If you encounter investment fraud over the holidays, use InvestRight's online Report a Scam form, or e-mail our inquiries department at inquiries@bcsc.bc.ca. On the app, touch the "Report Fraud" button to open up the Report Fraud page.

A couple of weeks ago, Gary, a BCSC inquiries officer, was a guest on Shushma Datt’s afternoon talk show, Gup Shup. Gary, who has been listening to Shushma since he was a young boy, spoke about our Be Fraud Aware public awareness campaign. He also talked about the warning signs of investment fraud, and the impact it has on individuals and communities.

Gary’s interview, which was in Punjabi and English, prompted a number of calls from listeners. He heard from a person who had been affected by an investment scam, as well as someone who was concerned about an investment she had bought. Other callers asked common questions that Gary fields in his daily work.

For those who didn’t hear the interview, I thought it would be useful to share the answers to listeners’ questions. These questions come up at InvestRight seminars and presentations too.

What is a security? 

Most people think of a “security” as a stock or bond that trades on an exchange, like the Toronto Stock Exchange. This is correct.

However, many other investments are also a “security”. Basically, if you invest in a business, including private companies and limited partnerships, which depends on others to make it successful, you are purchasing a security.

Before you make an investment, it is important for you to understand it. The About Investments section of InvestRight is a good place to start.

What is Forex and how is it traded? 

FOREX stands for Foreign Exchange. The forex market, also referred to as the currency or FX market, is basically the changing of one currency for another by simultaneously buying one and selling another. Your profits and losses depend on the fluctuations in the exchange rate between the two currencies. 

Forex is complex, volatile, and highly risky. Success in speculating on how numerous factors influence a currency’s value requires an expert’s ability to monitor and interpret complex data.

There are two pages where you can learn more about Forex on InvestRight: the Foreign Exchange webpage and the Forex Scams webpage.

Questions about Enforcement cases 

Two callers asked Gary about enforcement cases that affected the Lower Mainland’s South Asian community. You can find out about historical or current cases by searching the names of the individuals on the BCSC website, www.bcsc.bc.ca.

In November 2012, the British Columbia Securities Commission issued one sanction decision and one settlement agreement.  During November 2012, IIROC released one settlement agreement, one liability decision, and one decision rejecting allegations relating to BC registrants. The MFDA released one decision against a BC registrant last month.

We’ve included a summary of a few of the cases below.

BCSC Sanctions – Gibraltar Global Securities Inc.  

A British Columbia Securities Commission panel permanently banned Gibraltar from the province’s capital markets and fined Gibraltar $300,000. 

The panel found that Gibraltar, a company registered in the Bahamas, carried out trades and provided securities advice on behalf of BC residents without being registered in BC to do so.  The panel also found that Gibraltar’s continued refusal to provide information about BC residents who held accounts with Gibraltar made the company “unsuitable to engage in securities related activities in, or connected with, British Columbia”.

The panel declined to vary the freeze order that the BCSC issued in August 2011, at least until Gibraltar pays the administrative penalty.

BCSC Settlement Agreement – Sean Tan and Berkeley Coffee & Tea Inc. (Berkeley)  

Tan and Berkeley admitted in a settlement agreement that Berkeley illegally distributed securities in BC.  Tan, as CEO, president and sole director of Berkeley, agreed he was responsible for Berkeley’s violations of the Securities Act.

Tan agreed in the settlement agreement to pay $10,000 and to not act as a director or officer of any issuer or carry out investor relations activities on behalf of any issuer for a period of three years.  These prohibitions do not apply to Berkeley and a related company.

Under the terms of the settlement agreement, Berkeley must carry out any future capital raising activities through an exempt market dealer or registrant.

IIROC Settlement – Grupreet Pawar  

A hearing panel accepted a settlement agreement, with sanctions, between IIROC staff and Pawar.  Pawar consented to a permanent ban from registration in any capacity from IIROC.  He agreed to pay IIROC a fine of $80,000 and costs of $5,000.

Pawar admitted that he engaged in conduct unbecoming an IIROC member when he misappropriated $95,000 from four individuals.

Access to more cases 

SRO cases 

IIROC Liability Decision – David Hoang 

IIROC decision to dismiss allegations  

MFDA Liability and Sanctions Decision – Cheng Han Lee  

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Surrey 

Focus on Seniors Forum

Dec 1, 2012

9:00 am- 3:00 pm

South Surrey Recreation Centre 14601-20^th Avenue Surrey

This event is free for all seniors - focusing on an English speaking audience.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 (8:30 am - 4:30 pm Monday - Friday)
• Any City of Surrey Community or Seniors' Centres
• www.surrey.ca/register 

Victoria 

Be Fraud Aware seminar

December 5

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors’ organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

On Saturday, Nov. 17, InvestRight was in Surrey to participate in the city’s Focus on Seniors Forum, which was presented in Mandarin. About 190 people turned up to listen to three keynote speakers, the RCMP, Surrey Fire Services, and other community organizations. InvestRight’s Anne Rutherglen was one of the keynote speakers.

This series of forums tackles the increasingly important issue of elder abuse and neglect. According to Anne, most of the audience was 60+, and they were very interested in who we are and what we do. Of particular interest to people was our InvestRight Guide to Investing: How to make informed investment decisions.

Two weeks ago, we gave some tips for increasing your “investing literacy” which, according to a US study, declines 3.4% per year after the age of 60. In the post, we mentioned the “Know Yourself” section of InvestRight. For those looking for a tool they can download and takeaway, the Guide is a great resource. Here is a short Q & A based on what people were asking at the Forum.

What is the Guide? 

The Guide is a free publication (in PDF format) from InvestRight that helps BC residents understand the basics of making informed investment decisions that are consistent with their investment goals. The target audience is women and men who purchase financial products (stock, bonds, Mutual Funds, etc.) through a bank or investment firm. People who are saving for retirement or toward a major financial goal are also part of our intended audience.

What kind of information does the Guide provide? 

The Guide has loads of information to help you become more confident and involved in your dealings with your investment advisor. It has six different chapters focusing on topics like how to choose an investment advisor, and how to use research when making investment decisions. There are worksheets for documenting your financial position, and information about investing in private companies.

It is an information guide only. It can help you understand what to think about when making investment decisions, but does not replace the homework you must do, or the advice of a qualified professional.

Where can I get one? 

You can get the Guide from InvestRight.org. It is under the Informed Investing tab on the website, under the “Work with an Advisor” heading.

This year, I’ve noticed there are a lot of Canadian retailers jumping on the Black Friday bandwagon. For example, an article in yesterday’s Globe and Mail detailed the different deals stores in Canada are offering to keep customers from crossing the border.

For those unfamiliar with Black Friday, it falls immediately after American Thanksgiving in November. Retailers open early, and offer items at low prices to attract customers hungry for deals. It is similar to Boxing Day in Canada, and it kicks off the holiday shopping season in the U.S.

Since November is Financial Literacy month in Canada, I thought it would be good to remind people to have a game plan if they are thinking about taking advantage of Black Friday deals in B.C. or the U.S.

The first thing to do before taking advantage of any sale or special offer, is to assess your “wants” and “needs”. Getting your priorities straight will keep you on track to realize your financial goals. If something is a “want”, make sure you can afford it. You should also be honest with yourself (i.e. don’t talk yourself into believing a “want” is a “need”).

We suggest using a 1-2-3 rating system to establish your priorities. Here’s how it works:

1) Essential items for healthy living (e.g. basic food, clothing, and shelter, etc.)
2) Items that are not essential, but important (e.g. entertainment, education, etc.)
3) Not essential or important items (video games, new movies, etc.)

Second, be wary of using credit. Putting something on a credit card, and not paying it off immediately can have detrimental consequences on your long-term financial health. A recent study pointed out that B.C. residents are carrying the highest personal debt in the country. Remember, there are shopping events all year round – Boxing Day is just around the corner. It’s better to save for the item you want, than to rush into a purchase that could cost you headaches in the end.

Third, if you decide to take advantage of a sale, keep your emotions in check. Be careful to buy only what you can afford. Impulse buys add up quickly, and can put you in a position of taking on unnecessary debt. Sometimes stores place restrictions on sale items, so even if you have second thoughts, you may be stuck with what you buy.

Finally, don’t get caught up in the shopping frenzy taking place around you. We often shop with friends or family members who have different priorities or budgets. They also have different product knowledge and brand loyalties. Just because someone thinks an item is a good deal for them, does not mean it is right for you.

It’s best to go in with a plan and to stick to your budget. If you do this, you will probably come away with a positive experience. You will also be staying on track with your long-term financial goals.
 

Stay informed 

Newspapers, magazines, and websites offer an abundance of information on investing and investment products. Even though the information can be overwhelming, staying on top of market and financial issues can help you gain a better understanding of how investing works. Of course, you need to be careful to take a balanced view when thinking about your financial situation. Make sure you know yourself and have a good understanding of a financial product or service before making a decision that can affect your long-term financial goals.

Take a course 

When we visit trade shows, people often ask if we teach an investing course. We don’t. We give seminars on fraud awareness and provide information on our website on how to be an informed investor. For courses on investing, you can check with your local college or university. Some institutions provide night courses on these topics.

If you want to study at home, you may want to look into some offerings from the Canadian Securities Institute (CSI). The CSI offers career training and development for professionals working in the financial services sector. You can take courses to train to work in the industry, or you can take the Canadian Securities Course for Investors. This course is for those looking to gain more knowledge about investing. 

When choosing a course, be sure you research the instructors and sponsors. Some companies or investment clubs invite people to a seminar as a way to recruit new investors. If someone approaches you to attend a seminar about an investment opportunity, research carefully before attending.

Visit your advisor on a regular basis 

Stay in touch with your financial advisor. Take the knowledge you’ve gleaned from your reading, research, or a course, and bounce it off a professional. Sitting down and discussing the products in your portfolio and the strategy your advisor is using, will help reinforce your knowledge. It also allows you to evaluate your portfolio and your advisor’s performance on a regular basis.

If you have any questions or suggestions, please post them in our comments section.

In October 2012, the British Columbia Securities Commission issued one notice of hearing, two decisions, and reasons for revoking a temporary order. BCSC staff, with the help of the police, made one arrest.  During October 2012, IIROC released one settlement agreement relating to a BC registrant, and the MFDA released one decision against a BC registrant.

We’ve included a summary of a few of the cases below:

Arrest – Kelly Fielder  

The British Columbia Securities Commission’s Criminal Investigations Team and the Vancouver Police Department arrested Fielder and charged him with fraud over $5,000 and theft over $5,000. Both are Criminal Code charges that have not been proven.

BCSC Findings and Sanctions – Gaia Equity Investments, Midas Group Holdings Ltd., and Samuel Richard Allaby  

A British Columbia Securities Commission panel permanently banned Allaby, Midas and Gaia from the province’s capital markets and fined Allaby $50,000. 

The panel found that Allaby knowingly made false statements while promoting Gaia Equity Investments, a purported company claiming to guarantee B.C. investors a risk-free monthly rate of return of up to 9.83% through investments in renewable energy projects in developing countries. In its decision, the panel stated that Gaia is effectively a division of Midas Group Holdings Ltd, a company incorporated by Allaby and for which he is the sole director.

BCSC staff investigated the case after finding an advertisement that promoted the Gaia investment on the classifieds website, Craigslist.

BCSC Findings and Sanctions – Paul Lester Stiles 

A British Columbia Securities Commission panel permanently banned Stiles from the province’s capital markets and fined him $35,000.

The panel found that between 2009 and 2012, Stiles promoted an investment in Velocity Entertainment Inc. that he claimed would provide B.C. investors with returns ranging from 12% in one year to 100% within six months. Stiles was the sole director of Velocity, which was dissolved in 2005 and has never filed a prospectus in B.C.

The Velocity Entertainment investment was also promoted on the classified website, Craigslist. In its decision, the panel noted that Stiles ignored BCSC Staff warnings that his capital raising activities contravened securities laws.

The panel characterized Stiles’ disregard of BCSC staff warnings as “contempt for our system of securities regulation”, and stated that his conduct “shows that he has attempted fraud before and will continue to do so.” 

IIROC Settlement– Samuel Ryan Scoten  

A hearing panel accepted a settlement agreement, with sanctions, between IIROC staff and Scoten.  Scoten admitted that he solicited and facilitated the purchase of shares without his employer’s consent, he engaged in discretionary trading, and that he provided IIROC staff with information that he knew, or ought to have known, was false.

Scoten consented to a three-year prohibition from approval in any capacity from IIROC, and that he takes approved courses before being eligible for approval.  He will also be subject to one year of strict supervision once reapproved.  He agreed to pay IIROC a fine of $50,000 and costs of $5,000.

Access to more cases 

BCSC cases 

Notice of hearing: Jefferson Franklin Mesidor  

Reasons for decision re temporary order: Yan Zhu (also known as Rachel Zhu), Guan Qiang Zhang, and Bossteam E-Commerce Inc  

SRO cases 

MFDA decision re Raymond Ho 

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

On Tuesday, Brenda Leong, the BCSC Chair & CEO, gave a speech to the Vancouver Board of Trade entitled: Inspiring Investor Confidence: Building competitive and innovative capital markets in BC.  

In the speech, Leong talked about how the BCSC is protecting investors. To make her point, she emphasized the BCSC’s recent work in two areas: criminal enforcement and the private placement market.

Leong highlighted the work of our criminal enforcement team, which refers cases to Crown Counsel. Since the team’s formation in 2007, Crown has laid 346 charges in connection with 26 cases. This work resulted in charges against 27 people, and 10 convictions. She also discussed the work the BCSC has done to provide better protection to those who choose to invest in private start-up companies.

Other issues Leong’s speech touches on are:

• what happens to regulators when dealing with a financial crisis;
• what the BCSC is doing to restore investor confidence in BC; and,
• the work we are doing on derivatives regulation, proxy voting and crowdfunding.

We hope you will find the speech interesting and informative.

Where we are this month 

Qualicum Probus Club  

Be Fraud Aware seminar

November 6

St. Stephens United Church 150 Village Way, Qualicum Beach

Come for coffee & goodies at 9:00 am – meeting starts at 9:30

Cost: $5.00

No need to register – all welcome

Questions, call Marva Blackmore 250-594-3221

Surrey 

Focus on Seniors Forum

November 17

9:00 am- 3:00 pm

Guilford Recreation Centre 15102 -105 Avenue Surrey

This event is free for all seniors - focusing on a Mandarin speaking audience.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 ( 8:30 am - 4:30 pm) Monday - Friday)
• Any City of Surrey Community or Seniors’ Centres
• www.surrey.ca/register 

Coquitlam 

Be Fraud Aware seminar

Novemer 21, 2012
Hosted by City of Coquitlam 
Free seminar for those 50 years and older. Learn how to protect yourself from investment fraud.

Time: 1:00 pm - 2:00 pm
Location: Dogwood Pavillion 624 Poirier Street
Contact: To reserve please call 604-927-6098

Abbotsford 

Be Fraud Aware

November 26

Private event

North Vancouver 

Be Fraud Aware

November 27

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen

Program Manager, Outreach

Communications & Education

Email:arutherglen [at] bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

“Staying informed and alert is key to protecting against investment fraud and making informed investment decisions,” said Patricia Bowles, Director of Communications and Education for the BCSC. “Having information on the warning signs of investment fraud and the tools to spot and report a fraudster constantly at your finger tips will make assessing investment offers and decisions much easier for investors.”

The Be Fraud Aware mobile app, available for free from Apple’s App Store for use on iPhone or iPad, provides British Columbians with important information and tools to help them to protect themselves against investment fraud:

• Up-to-date news and Investor Alerts
• A ‘Fraud Finder’, an easy-to-use tool to help people spot investment fraud
• A ‘Risk Profiler’ which provides a means of assessing your personal risk tolerance
• The ability to complete a quick check of the CSA’s Disciplined Persons List to see if the person offering the investment services has been sanctioned or disciplined for misconduct
• Access to the BCSC’s Investment Caution List to determine if unregistered activity or unqualified securities are being promoted in British Columbia
• A glossary of scam terms that can to be used to identify warning signs of common investment scams

In addition, the red ‘report fraud’ button on the app allows individuals to act immediately and send information about potential investment fraud anonymously to the BCSC.

“Now, people sitting in an investment seminar or a meeting where they are asked to make a commitment on the spot can quickly and easily access information that will help them make an informed decision,” added Bowles. “They will also be able to report their suspicions and fears directly to the BCSC.”

Learn more about the BCSC’s Be Fraud Aware campaign at www.befraudaware.ca. 

The Canadian Securities Administrators (CSA) today released the 2012 CSA Investor Index, the third survey on investment knowledge, investor behaviour and incidence of investment fraud among Canadians. The previous two surveys were conducted in 2006 and 2009.

Key findings this year show that almost 30 per cent of Canadians surveyed believe they have been approached with an investment fraud at some point in their life. Over half agreed they were just as likely to be a victim of investment fraud as anyone else. However, just 29 per cent of those who believe they have been approached with a fraudulent investment said they reported the most recent occurrence to the authorities.

“Our research shows that Canadians continue to be approached with fraudulent investments and aren’t reporting it,” says Bill Rice, Chair of the CSA. “As securities regulators, enforcement is always a top priority for us, and to help us investigate investment fraud, we need to hear from those who have been affected. We encourage investors to report suspected fraudulent investments and to protect themselves by recognizing the warning signs of fraud.”

The Investor Index also shows that the overall investment knowledge of Canadians is low, with 40 per cent of Canadians failing a general investment knowledge test. According to the findings, 57 per cent of Canadians say they are confident when it comes to making investment decisions. Yet most Canadians have unrealistic expectations of market returns. When asked what they think the annual rate of return on the average investment portfolio is today, only 12 per cent of Canadians gave a realistic estimate, while 29 per cent provided an unrealistic estimate and 59 per cent explicitly chose not to hazard a guess.

“Understanding key investment concepts, such as the relationship between risk and return, can help investors make suitable investment decisions,” explains Rice. “The CSA provides unbiased tools and resources to help investors learn more about investing and how to protect themselves from fraud.”

New to the Investor Index this year was a series of questions to determine the use of blogs and other social media tools as a source of investment information. The findings confirm that social media is emerging as an investment tool, with over one-third of Canadians saying they have used at least one social media platform as a source of information about investing. However, traditional channels still dominate: the most common source of information about investing is finance professionals, and face-to-face meetings were deemed to be the most reliable source when making investment decisions.

Other survey findings show that:

• At the time the survey was conducted, investors were more optimistic about achieving their investment targets in the next five years (52 per cent) than in the next 12 months (39 per cent). Just over half believed they would be able to maintain or increase their level of current income in the coming 12 months.
• Nearly half of Canadians (49 per cent) say they have a financial advisor, up from 46 per cent in 2009 and 42 per cent in 2006. However, 60 per cent of those with a financial advisor have not ever completed any form of background check on their advisor.
• Thirty-one per cent of Canadians say they have a formal written financial plan, up from 25 per cent in 2009. Although more Canadians have a financial plan, they are reviewing it less frequently (78 per cent say they reviewed their plan in the past 12 months, down from 83 per cent in 2009).

The 2012 CSA Investor Index is a mixed methodology study combining a telephone study with an in-depth online study. Innovative Research Group interviewed 6,911 Canadian adults online between May 17 and 31, 2012. The online sample was weighted by age, gender, and province and territory using 2011 Statistics Canada Census data to reflect the actual demographic composition of the population. In addition, Innovative interviewed 2,006 Canadian adults via telephone in May 2012 to verify distributions from the online survey on key weighting variables, including incidence rates for particular investment behaviours.

A probability sample of this size would have an estimated margin of error of +/-1.4 percentage points, 19 times out of 20. The estimated margin of error would be larger within each sub-grouping of the sample.

The 2012 CSA Investor Index Executive Summary and full report are available online in both English and French on the CSA website at: www.securities-administrators.ca.

The CSA, the council of securities regulators of Canada’s provinces and territories, coordinates and harmonizes regulation for the Canadian capital markets. Its mandate is to provide investors with protection from unfair or fraudulent practices through regulation of the securities industry. Part of this protection is educating investors about the risk, responsibilities and rewards of investing. 

In September 2012, the BC Securities Commission issued one notice of hearing and announced a Supreme Court of Canada decision upholding a commission decision.  BCSC staff also added three companies to the Investment Caution List.

During September 2012, neither IIROC nor the MFDA released any decisions against registered individuals in BC. 

Supreme Court of Canada Decision – Kegham Kevin Torudag 

The Supreme Court of Canada dismissed Kegham Kevin Torudag’s application for leave to appeal a November 2011 decision of the British Columbia Court of Appeal, which upheld a British Columbia Securities Commission decision that he engaged in illegal insider trading.

The Court of Appeal upheld the commission’s view that because the BCSC regulates the Venture Exchange, they can prosecute illegal insider trading on the Venture Exchange. In effect, anyone who trades on the Venture Exchange, regardless of their location, is subject to the Securities Act.

At the original hearing, Torudag claimed he was not subject to the BCSC’s jurisdiction or the Securities Act because he was not in BC when he conducted the trades. The panel disagreed.

More cases: 

Notice of hearing: Jeffrey Karl Wiegel and Michael Jerome Knight 

Investment Caution List – Ocean International Ltd., Manhattan Capital Corp., and Wealth Capital Corp. 

On September 4, BCSC Staff added three names to the Investment Caution List that were temporarily cease traded by the Saskatchewan Financial Services Commission.

The SFSC issued the order against Ocean International Ltd., Manhattan Capital Corp., and Wealth International Corp., after receiving complaints from Saskatchewan residents who were solicited to invest with two of the companies.

The BCSC is also aware of one BC resident that Ocean International solicited to invest.

All three companies have the same office address and telephone number, and identical webpages. None of these three entities are registered in BC to trade in, or advise on, securities or exchange contracts.

We urge BC residents to exercise caution when dealing with firms that are not registered to trade in or advise in BC. 

Send us your comments 

If you like this post or have changes to suggest, let us know by sending in a comment.

Last week, I spoke to the Association of Certified Fraud Examiners, the world’s largest anti-fraud organization and premier provider of anti-fraud training and education. There is no more appropriate a group for a preview of the second year of the Be Fraud Aware campaign.

The goal of this campaign is to fraud proof British Columbians by teaching them the warning signs of investment fraud. We also want people to report investment fraud when they encounter and suspect it.

We use the character David Johnson as our fraudster. We want people to see just how

charismatic and charming he can be when he is pitching an investment. 

The two commercials and three YouTube videos show many facets of David Johnson – when he is selling, what his underlying motives are, and his reaction to being threatened by an unhappy investor. 

We modelled him on descriptions of high profile convicted fraudsters like Ian Thow, Bernie Madoff and Earl Jones.

Take a look.  See what you think.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

 Langley 

InvestRight seminar

October 2

Private event

Comox 

InvestRight seminar

October 9

Private event

Kamloops 

InvestRight seminar

October 10

Private event

Sorrento 

InvestRight seminar

October 11

Private event

Penticton 

Seniors Expo

October 12 & 13

10:00 am - 4:00 pm

Penticton Trade & Convention Centre 273 Power Street, Penticton, BC

All Welcome! Cost: Free

Surrey 

Focus on Seniors Forum

October 13

10:00 am - 3:00 pm

Chuck Bailey Recreation Centre – Gymnasium 13458 107 Avenue, Surrey

This event is free for all seniors - focusing on an Urdu speaking audience.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 ( 8:30 am - 4:30 pm, Monday - Friday)
• Any City of Surrey ‘s Community or Seniors' Centres
• www.surrey.ca/register 

Duncan 

InvestRight seminar

October 16

Private event

Mission  

InvestRight seminar

October 16

Private event

Nanaimo 

InvestRight seminar

October 20

Private event

Chilliwack 

InvestRight seminar

October 22

Private event

Comox 

InvestRight seminar

October 25

Private event

Surrey 

Focus on Seniors Forum

October 27

9:00 am- 3:00 pm

Newton Recreation Centre 13730 72 Ave., Surrey

This event is free for all seniors - focusing on an English speaking audience.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 ( 8:30 am - 4:30 pm, Monday - Friday)
• Any City of Surrey ‘s Community or Seniors' Centres
• www.surrey.ca/register 

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

The British Columbia Securities Commission today launched the second year of its three-year Be Fraud Aware campaign to educate British Columbians about the dangers of investment fraud. The campaign uses two compelling province-wide television commercials: “Stolen Dreams” and “Two Faced”; three YouTube videos; and a mobile application to alert people to the warning signs of investment fraud.

“We want British Columbians to fraud-proof themselves by recognizing and avoiding investment fraud.  We also want people to report investment fraud when they encounter or suspect it,” said BCSC Chair, Brenda Leong.

The two commercials feature David Johnson, a suave, obviously successful fraudster, who uses his persuasive powers to con people out of their money. “Stolen Dreams” shows how victims are often introduced to the fraudster through relationships of trust within their own communities. “Two-Faced” uses a split screen to demonstrate both the sales pitch and the underlying motives of a fraudster.

“We want people to see just how charismatic and charming these people can be when they are pitching an investment. We modelled him on descriptions of high profile convicted fraudsters like Ian Thow, Bernie Madoff and Earl Jones,” said Leong.

Three YouTube videos provide more insight into how con artists and investment schemes actually work: “Ponzi 101” and “Know Your Victim”; and “Fraudster Exposed 2”, a compelling story of how reporting can make a difference.

Coming soon to the Apple App Store is a Be Fraud Aware app that will provide people with important information and tools to help protect them from investment fraud. The campaign is produced in English, Punjabi, Mandarin and Cantonese. October is Investor Education month.

We are starting a monthly roundup of BC securities enforcement actions.  This new monthly posting comes out of meetings with focus groups of investors who indicated they wanted this information.  In addition to BCSC decisions, settlement and arrests, we may also include decisions or settlements of self-regulatory organizations, such as the Investment Industry Regulatory Organization of Canada (IIROC) or the Mutual Fund Dealers Association (MFDA), when the decisions relate to individuals in BC. 

In August 2012, the BCSC issued six notices of hearings and one decision on findings. BCSC staff made one arrest, with help from the police.  During August 2012, IIROC released one decision on findings and one settlement agreement relating to registered individuals in BC.  The MFDA released one decision against a registered individual in BC.

We’ve included a summary of a few of the cases below:

Arrests – Daniel Mark Jeremy Barton and Gregory Adam William Gillespie  

The British Columbia Securities Commission’s Criminal Investigations Team and the Saanich Police Department arrested Barton and Gillespie and charged them each with two counts under the Securities Act. The charges relate to selling securities without being registered and selling securities without a prospectus.

The BCSC is alleging that in 2008 and 2009, Barton and Gillespie distributed securities related to a purported real estate investment centred on 1250604 Alberta Ltd, an Alberta company controlled by Barton and doing business as both Oasis Properties and Caprice Investments. It is further alleged that Barton and Gillespie actively solicited investments in Oasis/Caprice without being registered, filing a prospectus or applying for exemptions.

The charges against Barton and Gillespie have not been proven.

BCSC Findings – JV Raleigh Superior Holdings Inc., Maisie Smith and Ingram Jeffrey Eshun   

A British Columbia Securities Commission panel found that JV Raleigh, Smith and Eshun breached securities laws by selling securities without being registered.

The panel found that JV Raleigh Superior Holdings Inc. entered into loan agreements with 81 investors between July 2006 and January 2009, raising approximately $5.7 million. The investors included 49 B.C. residents, who invested $3.2 million. The loan agreements are securities as defined under the Securities Act.

Smith and Eshun, each owned 50 per cent of JV Raleigh, and were the company’s two directors. Like the company, neither was registered to sell securities in BC.

Under the loan agreements, JV Raleigh was to borrow money from investors to purchase “consumer secured notes receivable”, which JV Raleigh described as “a form of factoring” with typically “high yields.”

IIROC Findings – Marco Myatovic and Doreen Lowe  

A hearing panel found that Myatovic and Lowe failed in their roles as gatekeepers by facilitating manipulative or suspicious trading activity in several client accounts, thereby engaging in conduct unbecoming contrary to IIROC rules. 

Both Myatovic and Lowe prearranged trades and took instructions from individuals who were not the relevant account holder.

Access to more cases 

Click on the following links for this month’s IIROC settlement and MFDA decision.  For BCSC announcements, go to the news release section of the website. 

Send us your comments 

If you like this or have changes to suggest, let us know by sending in a comment.

In the spirit of back to school, we thought it would be a good time to point people to some tools they can use to test on their fraud awareness.

Take the Fraud Challenge 

In March, we launched The Fraud Challenge, an interactive quiz that allows you to test your vulnerability to fraud. The five question quiz, which is available on BeFraudAware.ca, is based on questions asked in recent national research that found more than 1-in-5 Canadians (50+) are vulnerable a highly risky investment offer.

The Fraud Challenge allows you to see how you compare to those we surveyed in our research. After you enter your answers, a webpage appears displaying your score and the national average score side-by-side. You will also find the answers to the Fraud Challenge and a link to our YouTube page where we expose a fraudster.

If you like, you can share your score with friends via Facebook or Twitter.

CSA’s Online Fraud Awareness Campaign 

Also in March, the Canadian Securities Administrators (CSA), announced the results of its 10-week online fraud awareness campaign. The public education initiative included online ads and social media promotions that pointed to the website of a fictitious company, BlueHedge Investments.

During the campaign, the BlueHedge website received nearly 18,000 visits from across Canada, with 71% of those arriving via online advertising, some of which ran on popular search engines. Additionally, more than 10% of those who received unsolicited emails from BlueHedge opened the emails, and of those, almost 13% clicked on provided links.

You can visit the BlueHedge Investments (www.bluehedge.ca) website, which was set up to demonstrate how scam artists lure unsuspecting investors.

When you click to invest, the education website (www.BlueHedgeIsntReal.ca) appears to demonstrate the warning signs exhibited on the BlueHedge Investments website. The education website also provides a primer on how to arm yourself against possible investment scams, and video testimony from someone who was pitched an investment scam.

NASAA-CSA Investment Fraud Awareness Quiz 

This 12-question quiz is a collaborative effort between the CSA and North America Securities Administrators Association. It walks you through scenarios and questions that help you indentify areas where you may be vulnerable to fraud.

When you answer a question, a drop down answer will appear to tell you if you got it right or wrong. Each answer also explains why you are correct or incorrect. Take the quiz to learn how you can avoid being a victim of investment fraud.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Vancouver 

InvestRight seminar

September 15

Private event

Surrey 

Focus on Seniors Forum

September 15

9:00 am to 3:30 pm

Newton Recreation Centre Surrey 13730-72 Ave., Surrey

This event is free for all seniors - focusing on a Punjabi speaking audience. This forum will raise awareness of issues affecting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey. Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 (8:30 am to 4:30 pm, Monday to Friday)
• Any City of Surrey Community or Seniors' Centres
• www.surrey.ca/register  

Langley 

InvestRight seminar

September 28

1:30 to 2:30 pm

Langley Seniors' Centre 20605 51B Ave. Langley

This event is free for all seniors.

Register at info@lsrs.ca or 604-530-3020 ext 303

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

The BCSC recently added China International Capital Group, and two other companies to its Investment Caution List after learning they may be soliciting investors.

BCSC staff put China International Capital Group on the list after learning shareholders of York-Rio Resources might be receiving offers to buy back their shares at a substantial premium. The BCSC is aware of one BC resident who was contacted.

In the past, entities identifying themselves as Penn Capital Management and Featherstone Bellman Equity Exchange Group (FAB) also approached York-Rio shareholders with share buy-back offers. The BCSC issued investor alerts about Penn Capital and FAB, warning them they could be targets of a ‘recovery room’ or ‘re-up’ investment scheme.

In a ‘recovery room’ or ‘re-up’ scheme, victims of previous investment schemes are offered inflated prices for their shares. Once the investor agrees to sell their shares, a contract is drawn up and the investor is instructed to wire a sum of money to an offshore bank account to cover business costs. The perpetrators withdraw the money and the victim loses money a second time.

Penn Capital and FAB were also added to the Investment Caution List.

Knox Securities 

The BCSC placed Knox Securities Corp. LLC on the Investment Cautions List after learning Ontario investors received share buy-back offers.

According to an Aug. 1, 2012 warning by the Ontario Securities Commission (OSC), Knox Securities is soliciting investors via e-mail and telephone to sell shares of illiquid companies, including SK Resources. The warning says OSC staff are aware that investors who purchased a number of illiquid securities, including SK Resources, have previously been and are now being targeted by fraudulent “advance fee” schemes.

Best Commodity Options 

On July 24, 2012, the Autorité des marchés financiers in Quebec warned investors about recent solicitations to invest in the derivatives market made by e-mail and telephone. The company making the solicitations was Best Commodity Options, a company that is not authorized to operate in Quebec or BC.    

None of these three Investment Caution List additions are registered to trade in, or advise on, securities and exchange contracts in BC. We urge BC residents to exercise extreme caution when dealing with firms that are not registered to trade or advise in securities.

Time and time again, we hear the reasons for not reporting: it is too difficult; I do not know who to report it to; I am too embarrassed; I am too ashamed; I signed a confidentiality agreement…the list goes on and on.

The benefits of reporting far exceed the reasons not to. So please look for the investment fraud warning signs, and report to us anything you think is suspicious – whether it involves you, your family, or your friends.

There are a variety of ways you can report suspicious activity that involves the buying and selling of securities. 

We make it as easy as possible for anyone to report to us.

• You can phone our inquiries line 604-899-6854 or 1-800-373-6393.  You will be able to talk to one of our staff to outline your concerns.  You can report anonymously, or you can give us your contact information so our investigators can follow-up with you. 
• You can fill out a complaint form and email it to inquiries@bcsc.bc.ca.
• You can respond to our blog in the form of a comment, and we will follow-up to get more information.
• You can fill out Report a Scam and simply click on the submit button and it will go right to our Inquiries Group.

Daily media reports about companies not meeting sales targets, accounting concerns and poor earnings reports are also making investors more sensitive to fees and other costs that reduce their overall investment returns.

As a result, many investors are moving their money back into cash, even though they expect a negative return using this approach.

Alternatively, they may decide to diversify by putting their money into investments outside of the regulated markets. Either investors seek out new opportunities on their own, or they are approached by slick promoters promising guaranteed returns, often through free seminars or well-put together websites.

The combination of investors looking for greater returns that they can get in the regulated markets and smart fraudsters dreaming up new Ponzi schemes is a recipe for disaster.  Regulators can only do so much to protect people.

What’s the solution? Investors must do their own due diligence before writing the cheque.  Understand the warning signs for an investment scam. Check the CSA’s Disciplined Persons list to see if the person has ever run into trouble with regulators.  Talk to a qualified person, ask them to look at the investment and get a second opinion. 

These are rough and tough times for investors. At the very least, investors need to hang onto what they already have, not lose it to an unscrupulous individual. 

Kelowna
InvestRight seminar
August 22
Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,
Program Manager, Outreach
Communications & Education
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393
 

Last month, we ran a four-part blog series to raise awareness around the financial abuse of elders. Even though June 15 is officially World Elder Abuse Awareness Day, we want to reach out to let people know there is information available to them year-round.

One great example is the City of Surrey’s Seniors Advisory and Accessibility Committee (SAAC). It facilitates forums throughout the year to address the issue of abuse and neglect of elders in the community.

Volunteers representing various city departments, safety services (fire and police), senior support services, related community groups and individuals come together with passion and resources to offer all-day forums that are free of charge to Surrey’s senior residents.

This innovative model allows this diverse group to share their information and resources with seniors, caregivers and families on physical, emotional and financial abuse. It also helps establish a strong working relationship with outside agencies, like the BC Securities Commission, which is trying to reach seniors where they live through its InvestRight education program.

The City of Surrey offers these forums in a variety of languages including English, Punjabi, Korean, Urdu, and Mandarin, which extends their reach and popularity. In fact, these forums are so popular, they are often booked up well in advance.

InvestRight is proud to be a part of this successful program to raise awareness on the dangers of investment fraud. These forums are a great fit for our Be Fraud Aware campaign, which focuses on seniors and pre-retirees, who are the most vulnerable to investment schemes.

We travel the province throughout the year, and we are always interested in participating in events or forums that focus on seniors and pre-retirees. If your community offers these kinds of outreach events this audience, we would like to hear from you.

To view upcoming Focus on Senior’s forums, please go to our InvestRight “In your Community” monthly listings.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Surrey 

InvestRight seminar - July 29

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

This month, we are running a series of blog posts to urge British Columbians to be aware and report financial abuse involving seniors. World Elder Abuse Awareness Day occurs every June 15 and Seniors' Week in BC was June 3 to 9. We encourage you to share these posts with friends, family, or people who work with the elderly to bring attention to the issue.

In this post, we will introduce you to some websites that provide information about elder abuse and resource links where you can get help. Remember, if you are concerned about an investment or an individual who is selling investments, give us a call or report it online through our website.

Canadian Securities Administrators (CSA) 

The CSA provides a number of brochures on the Investor Tools section of its website. Sandwich Generation: Are you caught in the middle? and Scam Artists Pursue Adults over 50 are two publications that provide information related to retirees and the elderly.

Canadian Bar Association: BC Branch 

This page provides legal information for seniors on a variety of topics related to finances and their rights. It also provides links to publications that outline benefits and services available to seniors.

Canadian Centre for Elder Law 

This national, non-profit was established in 2003 by the B.C. Law Institute. The CCEL publishes a journal and provides resources for public use. A project called Financial 101: Protect Yourself! is a self-contained workshop that can be used to train volunteers to deliver financial literacy to older adults. The CCEL’s resource page also provides links to a number of informative resources. 

BC Centre for Elder Advocacy Support 

This non-profit raises awareness about elder abuse, and provides programs to its clients. The centre provides an information line, victim services, and legal resources. It also does education outreach.

Victimsinfo.ca 

This is an online resource for victims and witnesses of crime in BC. The Abuse and Neglect of Older Adults page give a step-by-step guide on what to do and where you can go for support. The website also provides a number of links to organization and services for seniors.

SeniorsBC 

The BC government provides this webpage with links to resources and services across the province.

Last night, CBC TV ran a story about the collection rates of financial penalties imposed by Canadian regulators. 

In our last post, we explained that our rate of collection was lower than other Canadian regulators because of four significant fraud cases, on of which was the Manna Trading Corp. case. We went on to feature the Manna Trading Corp. case to highlight a BCSC panel’s comments regarding the legislation that allows for $1 million-plus penalties.

In this post, we are highlighting the three other fraud cases where BCSC panels have imposed high penalties to provide a deterrent against this type of misconduct.

Sun Wan (Sean) Kim: a BCSC panel found that Kim significantly harmed investors and abused both the capital markets and the authority of the commission when he targeted the Korean religious community to enrich himself.  Kim, a registered futures trader with his own firm Cirplus Future Inc., took $15.7 million from 35 BC investors (most of them members of the same Burnaby Baptist Church) and one Korean investor. 

The panel wrote:  “Kim set out to steal the investors’ money. He lied to them about how their funds would be invested and the returns they would earn.  He forged letters purportedly from the BC Securities Commission falsely stating that the BCSC was actively engaged in the oversight of Cirplus’ business.  He falsified investor account statements and made them appear to be from the carrying broker.”

The BCSC panel permanently banned Kim from capital markets and imposed combined penalties of more than $47 million (the highest in Canada to date) for misconduct “at the top range of seriousness.”

Mr. Kim fled to South Korea where he was convicted of financial crimes and put in jail.

Luc Castiglioni: Castiglioni raised a total of $8.2 million from more than 60 investors using two companies, CPLC Limited Partnership and CPLC Management Group Ltd.  He prepared false account statements for investors, and misrepresented the structure and operation of the companies to them. 

He also forged bank statements in order to frustrate commission staff’s attempt to discover the truth. Castiglioni prepared documents for investors that said CPLC Management group was a registered portfolio manager and that he was a registered advisor. 

The panel said: “This was a lie and a serious one. Registration is one of the key investor protection mechanisms in the Act and a representation of registration leads investors to a degree of trust and reliance that they otherwise would not have.”

The panel fined Castiglioni $6 million – three times the amount he defrauded investors, plus an additional $2 million.

The International Fiduciary Corp. Three men, Malcolm Cameron Boyd Stevenson, Daniel Eric Byer (of Abbotsford) and Preston Pinkett II (of Virginia) perpetuated a fraud through an investment vehicle called International Fiduciary Corp SA.

The men promised investors a return of 6 percent a month, telling them this was possible through ICS’s “asset growth program” that purportedly bough securities called “1^st Tier medium term bank notes”. The program was a Ponzi scheme that took over $23.3 million from 89 BC investors, who received payments of only $10.3 million.

The panel imposed combined penalties of $16.7 million.  At the time, the receiver had located a little over $8 million in IFC bank accounts, suggesting that any recovery from IFC will fall far short of any meaningful repayment of the investors’ principal.

Today, the CBC ran a story about the collection rates of financial penalties imposed by Canadian securities regulators.  The size and total amount vary considerably depending on the nature of the case.  BC’s rate of collection was considerably lower because BCSC imposed record-high penalties totalling $113 million in four significant investment fraud cases. 

In the absence of these penalties, the BCSC’s rate of collection increases to more than 50% when you take the four cases out of the overall figure of $119 million owing.

Regulators make every reasonable effort to collect monetary penalties, including using the service of collection agencies and registering judgements against assets.  Recovery is often limited as a significant number of cases involve serious fraud where there is little or no likelihood of ever collection the money as is the case in these four cases.

In the Manna Trading Corp. case sanctions decision, which was issued in September 2009, the BCSC panel clearly explained the rational behind the significant administrative penalties.

The panel said, “In amending section 162, the Legislature quadrupled the maximum penalty and authorized the maximum to be applied “per contravention”. It seems clear that the Legislature’s intent was that the Commission have the power to impose significant administrative penalties in the public interest where appropriate in the circumstances.”

In the Manna Trading Corp. case, four Hal (Mick) Allan McLeod, David John Vaughan, Kenneth Robert McMordie (also known as Byrun Fox) and Dianne Sharon Rosiek perpetrated a “deliberate and well-organized” fraud in a Ponzi scheme that resulted in the loss of over $10 million by more than 800 investors in BC and elsewhere. 

The Ponzi scheme began as an investment club which ultimately grew to $16 million before its collapse in June 2007. The BCSC panel permanently banned the four BC residents and ordered them to pay combined penalties of $42 million for operating a Ponzi scheme.

“In these circumstances, we are making orders based on the upper limit – US$13 million,” the panel said. “To provide an appropriate deterrent, we have doubled that amount and allocated that total penalty among the respondents in proportion to what we consider their relative culpability.”

On March 7, 2012, BCSC’s Criminal Investigations Team arrested McLeod at him home with the assistance of the Surrey RCMP.  The arrest followed an undercover investigation by the BCSC.  McLeod is charged in connection with the Provina Investment.

In our next post, we’ll highlight three other cases where BCSC panels have levied high penalties.

This month, we are running a series of blog posts to urge British Columbians to be aware and report financial abuse involving seniors. World Elder Abuse Awareness Day occurs every June 15 and Seniors' Week in BC was June 3 to 9. We encourage you to share these posts with friends, family, or people who work with the elderly to bring attention to the issue.

In our last post, we talked about investment seminars and high-pressure sales techniques in face-to-face meetings.

This week, we’ll look at some common scams that fraudsters use to take older people’s money. If you think an older relative or friend is involved in an investment scheme, or someone is pressuring them to invest, let us know.

When we see frauds in this area, it’s often associated with a fictitious investment that turns out to be a Pyramid or Ponzi scheme.

The investment “product” sold to people comes in many forms – an opportunity to invest in a private company, Forex trading, promissory notes, etc.  You can consult this webpage to learn about the common schemes securities regulators uncover.

The common offering in almost all of these scams is guarantees of higher-than-normal rates of return, with little or no risk. There are other warning signs you also need to watch out for, but this one is key.

To avoid a scam or unsuitable investment, it is best to take time to consider the offer. You should also consult with a registered financial advisor independent of the deal. They can help you understand the investment, and if it is suitable for your portfolio.

We also talked about cold calls in our last post.

Cold callers target the elderly because they have money, and they are often at home during the day. Boiler room operators use cold calls and e-mail to solicit investors. They will try to persuade the person who answers the call to invest in the company they are promoting, often with the promise that there is an opportunity to get in before the company goes public.

Once they successfully take your money in this scheme, they might try to scam you again using another scheme. It’s called a recovery room scheme, and the hook is to suggest they can get your money back by paying them a fee.

The best way to avoid falling victim to a boiler room scheme is to hang up the phone. After you hang up, call the BCSC immediately. You may also want to refer to the Investment Caution List to see if the company that called you has come to the attention of regulators in the past.

In our final post, we will post links to information and resources where people can get help and learn more about elder abuse.   

This month, we are running a series of blog posts to urge British Columbians to be aware and report financial abuse involving seniors.

World Elder Abuse Awareness Day occurs every June 15 and Seniors' Week in BC was June 3 to 9. We encourage you to share these posts with friends, family, or people who work with the elderly to bring attention to the issue.

In this post, we will highlight some common approaches used to get older people to invest in a scam or unsuitable investment.

One common approach used to attract older investor audiences is an investment seminar or financial trade show. These events take place in hotels, and offer free meals or prizes to attendees. You may also find them offered in community centres or other places where organizers think they can attract an attentive audience.

The speakers at these events can be very convincing and charismatic. They may talk about “wealth strategies”, “passive income techniques”, or “financial freedom”. High-pressure techniques are often the way presenters and the seminar producers employ to get people to sign up for courses, coaching, or an investment.  

There’s an e-learning video on our YouTube page that talks more out about investment seminars, and how they work.

Another common approach is to reach older individuals through a tight-knit group or community associations. An investment product that is being sold secretly, or exclusively, to friends and family should raise concerns. Scam artists often tell people to keep the deal quiet in order not be discovered.

Cold calls, unsolicited e-mail, and social networking websites pose a threat to the elderly. Unscrupulous promoters will try to hook people over the phone. They also use social network sites to sell questionable investment products to seniors.  

If you find out that an elderly person is involved in an investment that may be a scam or unsuitable, you should suggest they seek help from a person independent of the investment. Help them analyze the offer or purchase before going any further.  You also should report suspect investments or unscrupulous promoters to us. Encourage the person you are concerned about to do the same.

In our next post, we’ll talk about some of the scams people need to look out for.

This month, we are running a series of blog posts to urge British Columbians to be aware and report financial abuse involving seniors. World Elder Abuse Awareness Day occurs every June 15 and Seniors' Week in BC is June 3 to 9. We encourage you to share these posts with friends, family, or people who work with the elderly to bring attention to the issue.

Unfortunately, elder abuse is a common occurrence. According to 1996 research done by Simon Fraser University, eight per cent of BC seniors (60+) experienced financial abuse, and a further 10 per cent not experiencing financial abuse were aware of a close friend or relative that had. Furthermore, one in 12 victims report losing more than $20,000.

For people living on a fixed income, losing money to an investment scam can be devastating. When seniors lose money, they often don’t have the means to recover it. Even if they’ve planned carefully, a dent in their nest egg can seriously alter their lifestyle. We also know the stress of being victimized can impact a person’s health from our own research.

In our InvestRight seminar, we point out that one of the victims of an investment scam that occurred in the Kamloops area had two strokes. Another man who also had a stroke, lost his ability to speak.

So what can you to stop this from happening to someone you know or love?
 

People who steal money from older people tend to be in a position of trust – it can be a caregiver, or a scam artist who knows how to befriend elderly people. This webpage describes the how older people are taken advantage of by people who end up stealing their savings.

It’s also important to remember family members may also take advantage of a grandparent or elderly parent. This article in Investment Executive describes how people use power of attorney to take money from, or put an elderly family member into unsuitable investments.

In our next post, we will discuss how retirees and pre-retirees are targeted by scam artists.

Recently, my colleague and I had the pleasure of presenting an InvestRight seminar to a group at the Metrotown branch of Burnaby library. The reception the presentation received was great, and we had a quite a few questions during and after the seminar.

Last week, we provided answers to half of the questions we received. This week’s post takes care of the rest. Again, if you have additional questions, feel free to post them in the comments section below.

Q: If we complain to InvestRight, how do we know if someone is looking at our complaint? 

A: Generally, we don’t publicly discuss complaints until we take enforcement action in order to preserve the integrity of an investigation. However, we look at every complaint we receive and we acknowledge all inquiries. If we decide to pursue a complaint from an investor, we may contact the complainant to collect more information. When we take enforcement action against a company or individual, we announce it through a news release that we publish to the BCSC website. 

Q: What key information do I include in a complaint, if I decide to make one? 

A: Our Filing a Complaint page is where you should start. First, you must decide if you are making a complaint against a company, and individual advisor, or both. You can use the “Complete a Complaint Form” webpage as a guide. You can also download a form from this section, which asks for key information. If you have any question call, or e-mail BCSC Inquiries.  

Q: Are there other organizations like yours outside of BC? 

A: Yes, there are 10 provincial and three territorial securities regulators in Canada. We are all  members of the Canadian Securities Administrators (CSA). While the CSA co-ordinates initiatives on a cross-Canada basis, provincial or territorial regulators handle all complaints and enforcement regarding securities violations in their respective jurisdictions. The CSA website hosts national registration and disciplined persons databases. You will also find contact information for all of the regulators on the CSA website. 

Q: Who pays for InvestRight, and the BCSC’s investor education programming? 

A: The BCSC funds InvestRight primarily from money from penalties and fines imposed on individuals and companies that have contravened the BC Securities Act. 

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Nelson 

InvestRight seminar

June 5

Private event

Castlegar 

InvestRight seminar

June 5

Private event

White Rock 

InvestRight Seminar

June 5

Private event

Nelson  

InvestRight seminar

June 6

Private event

Grand Forks 

InvestRight seminar

June 7

Private event 

Nanaimo 

InvestRight seminar

June 7

Private event 

Surrey 

Aging in Place Conference - a free event for Surrey seniors, focusing on healthy lifestyles, education and advocacy safety.

June 8

Doors open at 8:00 am - with  free coffee, tea and treats

Fleetwood Community Centre 15996 84 Avenue Surrey.

• Opening remarks start at 8:30 am
• Workshops throughout the day. Sign up for the InvestRight seminars at 9:45am - 10:45am or 1:30pm- 2:30pm.
• Free participant package.
• Lunch available upon purchase
• Door prizes.

To register for this and other workshops call 604-501-5100. For more information on workshops and transportation go to http://www.surrey.ca/files/SeniorsConferenceBrochure.pdf 

Kelowna 

Seniors Safety fair - a free public event that focuses on the safety and well-being of seniors

June 13

9:00am – 1:00pm

Trinity Baptist Church, Spall and Springfield, Kelowna

• Browse displays of over 40 seniors focused services, including the BC Securities Commission.
• Presentation on Power of Attorney at 9:30 am
• Door prizes and refreshments

For more information call 250-861-6180

Surrey 

June 28

InvestRight seminar

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

Recently, my colleague and I had the pleasure of presenting an InvestRight seminar to a group at the Metrotown branch of Burnaby library. The reception the presentation received was great, and we had a quite a few questions during and after the seminar.

Because this seminar was open to the public, I thought it would be a good idea to share the questions and answers in a blog post. I also plan to put some of them up in the Q & A section of the website for people to access. Please let us know if you have any other questions in the comment section below. 

Q: Are online brokerage dealers registered? How do I know? 

A: If you want to trade securities on your own in Canada, you can use an online investing account. These accounts must be held by a registered investment firm in Canada. You can check a company’s registration by using the National Registration search, or by calling BCSC Inquiries. If you think a firm is not registered, report it right away. Unregistered, offshore firms sometimes solicit BC investors to open up trading accounts. 

Q: Who registers insurance brokers? 

A: The Insurance Council of British Columbia licenses and deals with complaints about insurance agents, salespeople, and adjustors. However, if you think someone is illegally distributing securities or illegally selling non-insurance investment products, you should report it to the BCSC immediately.  

Q: Is my real estate investment a security? 

A: Real Estate investments can be securities. To find out more about this type of investment product, refer to our Real Estate-based securities webpage. We’ve also published Investor Watches on the subject, which are available on the above-mentioned webpage. 

Q: Does the BCSC arrest people, and put them in jail? 

A: The BCSC has no power to put people in jail. However, the BCSC’s criminal investigation team does investigate and refer cases to Crown Counsel for prosecution. The courts can then impose penalties. Court-imposed jail terms and fines can act as deterrents for those for whom administrative penalties are not a deterrent. This chart describes how the enforcement process works in Canada. 

Next week we will publish the answers to more audience questions. If you have any questions, please post a comment below.

An interesting piece in the NY Times talked about how high net-worth, older investors in the United States are being targeted for investment fraud. The articles calls investment fraud a “growth business.”

There is no question that the same thing is happening here.  We have significant populations of older Canadians living in communities like Victoria, Kelowna, and White Rock, providing unlimited opportunities for fraudsters. 

The only thing that prevents investment fraud from happening is investors’ ability to protect themselves.  And, therein lies the problem.  Many investors don’t know how to protect themselves.

We know that the main incentive for older Canadians to take more risk is the promise of greater returns. 

In a recent survey of about 2,500 older Canadians (50+), we found out that at least 2-in-5 don’t understand the fundamental relationship between risk and return. Only 1-in-4 has a realistic expectation of the current rates of return for their investments.

Think about why these findings are so significant.  If you are one of the almost 45% of Canadians who don’t understand the concept of risk and return, you are more likely to fall for any of those fraudulent offers that are being made every day – on the Internet, in sales seminars, on the telephone, or through a friend or family member.

That is why we launched a three-year Be Fraud Aware campaign – to get the message out to people about how to protect themselves.

It is never too late to become better informed about investing!

The Globe and Mail’s Janet McFarland and the Vancouver Sun’s David Baines both wrote about our recent notices of hearing about responding to investment offers on Craigslist.

In March, we alleged that a BC man and two companies he controls made materially false statements while promoting an investment on Craigslist.  Gaia Equity claimed to guarantee BC investors a risk-free monthly rate of return of up to 9.83% through investments in renewable energy projects in developing countries. Samuel Richard Allaby also claimed that these risk-free investments were guaranteed by the World Bank and the International Monetary Fund.

In May, we alleged that Paul Stiles told investors through ads posted on Craigslist that investors could earn returns ranging from 12% annually to 100% within six months by investing in Velocity Entertainment Inc., a private company that he claimed was producing feature films.

Two messages: there is no such thing as a guaranteed return and the returns promised in both of these cases are completely unrealistic.  And, don’t respond to any investment offers on Craigslist.

On Wednesday, CTV’s Lynda Steele featured our Be Fraud Aware campaign on the network’s newscast. The three-minute video is available on the CTV website on a dedicated webpage  that features much of the content from the news story.

Pat Bowles, the BCSC’s director of Communication and Education, appears in the piece talking about some of the warning signs of investment fraud, such as high-pressure sales tactics and offshore tax-free investments. Steele also goes over some other indications an investment could be a fraud, and encourage people to do their due diligence when investing.

For anyone who hasn’t seen the story, we suggest you take the time to watch it online. It’s a great introduction to what you should be looking out for, and we hope it encourages more awareness and reporting of fraud.

When you report an investment opportunity that you know or suspect isn’t right, you enable the BCSC to investigate the matter. Many investigations lead to enforcement actions that shut down sham operations and remove those involved from the market.

You can report through our website by simply clicking on the red “Report to us” button on the homepage.

Recently, we opened an investigation and took action against two people after receiving reports through InvestRight’s Report a Scam form. This online tool allows you to report your concerns about possible investment scams anonymously.

We also have an Inquiries Groups who answer calls from the public. You can reach them at 604-899-6854 or 1-800-373-6393.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Campbell River   

Spring Home Expo

May 4 - 5:00 pm - 9:00 pm

May 5 - 9:30 am – 5:30 pm

May 6 - 10:00 am – 4:00 pm

Strathcona Gardens Arena, 225 South Dogwood Street

For more information go http://www.homeshowtime.com/events/events_details.asp?evID=110 
All welcome! Cost: Free

Kelowna  

InvestRight seminar

May 14

Private event

Nanaimo  

InvestRight seminar

May 17

Private event

Abbotsford  

InvestRight seminar

May 17

Private event

Surrey  

May 27

Private event 

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

In this post, I will point to some websites aimed at helping young people develop their financial skills. This is not an extensive list, of course, and we encourage you to post other resources in the comments section below.

The City/La Zone
In 2008, the BCSC and FCAC launched an online resource called The City/La Zone. This resource is available to all young Canadians and their teachers in both official languages. It uses interactive activities and worksheets that let young people practice real-life skills. The City/La Zone is based on the BCSC’s The City: Financial Life Skills for Planning 10 and is available to students and teachers across the country.

My Money $ My Future 

The Certified General Accountants of Alberta offer this free resource to help high school students determine their options when it comes to making financial decisions. The website offers a quiz to see if you are “a saver or a spender”, a debt calculator, and helpful tips on saving and earning. You can also download a free workbook or sign up for monthly financial tips.

Make it Count
The Canadian Securities Administrator’s Make it Count program offers a series of activities, tips and lesson plans that are simple to follow and easy to teach. The program includes a parent’s guide, an instructor’s guide and an online daily budgeting program that uses everyday situations like errands to engage youth in discussions about money management. There is also a mobile app available through the iTunes store.

Your Money 

This website from the Canadian Banker’s Association offers resources for teachers, parents, and students. The website it tailored to serve these three distinct audiences with sections catering to each of their needs. For example, in the student section, young people will find links to information about budgeting, saving, and investing. The website also taps into outside resources, like The City’s “Lifestyle Reality Check” worksheet.

Cranial Cash Clash
This online financial assessment tool allows you to test your knowledge against other people playing online. You play by first choosing a finance-themed, multiple-choice quiz. Your score is determined by how quickly, and correctly, you answer the questions. Your can share and track your score on social networking websites. 

For more links to financial literacy resources for young people, visit the Youth Education section of InvestRight. 

After receiving reports that Medwell Capital Corp. shareholders were contacted in what appeared to be a “recovery room” scheme, the B.C., Alberta and Ontario securities commissions issued Investor Alerts. BCSC staff also added NT Global to the Investment Caution List.

The man contacting Medwell Capital Corp. shareholders went by the name of Michael DeJuan, of NT Global, which purports to be a Toronto-based company. The NT Global website is suspended, and the address the company lists as its headquarters is a virtual office.  Another company with a similar name, NT Global Advisors Inc., confirmed to the Ontario Securities Commission that neither it, nor any of its employees, has been contacting Medwell Capital Corp. shareholders.

You can read more about recovery room schemes in the Investor Protection section of the website.

On March 15, BCSC staff added Ava FX, Ava Financial Ltd., Ava Capital Markets Ltd., 4XP Investments & Trading, and Forex Place Ltd. to the Investment Caution List. A British Columbia resident brought the companies’ websites to the attention of staff.

BCSC staff also added Pennington Global, Wentworth & Wellesley Ltd., and Wentworth & Wellesley Metals to the Investment Caution List in mid-March.

Pennington Global came to the attention of BCSC staff after a representative of the firm solicited a B.C. resident to open a commodities trading account. Another law enforcement agency reported Wentworth & Wellesley to the BCSC. These companies also purport to be commodities brokers, and have opened trading accounts with Alberta and Saskatchewan residents.

None of these eight additions to the Investment Caution List are registered to trade in, or advise on, securities and exchange contracts. We urge B.C. residents to exercise extreme caution when dealing with firms that are not registered to trade or advise in securities.

We also encourage people to report investment offers by unregistered foreign entities to the BCSC immediately. You should always check an advisor or company’s registration by doing a background search.

These are some of the common methods scam artists use to entice people to invest in their schemes.

For example, in one case, BC investors were pressured by boiler-room sales techniques into putting money in an investment that promised returns of more than 400 per cent by year three of their investment. This is just one of the many cases highlighted in the CSA’s 2011 enforcement report. 

When it comes to investing, don’t accept promises without doing your homework. Visit InvestRight.org to learn what you need to know.

On Feb. 14, 2012, the BCSC issued an Investor Alert announcing it was investigating Rashida Samji and Arvindbhai Bakorbhai Patel (aka Arvin Patel).

We also activated an Investor Communications Services Centre (ICSC) webpage on InvestRight to provide investors with resource information and to let them know about developments in the case.

This week, the BCSC’s executive director issued a notice of hearing alleging that Samji and two companies she controls committed a fraud that raised about $83 million from 218 investors.

The BCSC also announced that it had settled with Patel, who admitted he introduced approximately 90 investors to an investment opportunity through Samji, then a notary public. Patel, a former mutual fund salesperson and financial planner with Coast Capital Savings, has received a permanent market ban in B.C. for his misconduct.

Patel has voluntarily transferred his legal and beneficial interest in five properties to the receiver, which the BCSC applied for and was appointed by the Supreme Court of British Columbia (his remaining assets remain subject to a freeze order).

The receiver has published a webpage that includes court documents and a notice about an investors’ meeting. Patty E. Wood is the contact at MNP Ltd. She can be reached at 604-637-1535, or via email at patty.wood@mnp.ca. 

Details about the Samji notice of hearing and Patel settlement agreement can be found in BCSC news releases we link to on the ICSC webpage. You can view the Patel and Samji hearing files on the BCSC website here and here.

Where we are this month 

Nanaimo 

InvestRight seminar

April 4

Private event

Burnaby  

InvestRight seminar

Hosted by Burnaby Public Library

April 16

6:30 pm - 8:30 pm

Program room, Bob Prittie Metrotown Branch, 6100 Willingdon Ave.

Free underground parking

Cost: free

To register contact:  604-436-5400

Vancouver 

InvestRight seminar

April 21

Private event

Dawson Creek 

April 24 - morning

Private event

Dawson Creek 

April 24 - afternoon

Private event

Pouce Coupe 

April 26

Private event 

Surrey 

Focus on Seniors Forum

April 26

9:00 a.m. – 3:00 p.m.

Newton Seniors Centre 13775-70 Avenue, Surrey

This event is free for all seniors - focusing on an English speaking audience. This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided.Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 ( 8:30 am- 4:30 pm) Monday- Friday)
• Any City of Surrey ‘s Community or Senior’s Centres
• www.surrey.ca/register 

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,

Program Manager, Outreach

Communications & Education

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

When it comes to reporting investment fraud, that is?

Well, in British Columbia, your best bet is the BC Securities Commission.

Because when it comes to investment fraud, it is often the BCSC that can move rapidly to disrupt, stop and prevent fraud from claiming more victims by ordering a cease-trade in a suspicious investment or freezing assets or issuing an investor alert. It helps if we hear about the misconduct as soon as possible.

That’s a key reason for the ‘Be Fraud Aware’ campaign currently underway in BC as we work to raise awareness about investment fraud and how people can protect themselves through a province-wide communications and marketing campaign. Through advertising on TV, radio, newspapers and online, we are making people aware of the warning signs of fraud and importantly, encouraging them to report to us any suspicious investments that they come across.

So, report any suspicious investments to us at InvestRight.org or if you prefer, by calling our Inquiries group at 604-899-6854 (1-800-373-6393).

Your call can start the enforcement process necessary to stop a fraud.

Interesting article in the Vancouver Sun this week by Vancouver-based portfolio manager, Michael Schaab, of Leith Wheeler Investment Counsel.

Schaab tells investors they need to take a closer look at the risks of chasing yield. "Making investment decisions based on yield alone can frequently end in disappointment. Higher yields do not indicate better investments. In fact, they sometimes point to more dangerous ones."

BCSC InvestRight research published earlier this month delves into that danger zone. We surveyed almost 2,500 Canadians 50+ to find out what makes people vulnerable to investment fraud. It turns out that our relationship with investment yield is at the heart of it.

Yield is simply the income return on an investment, usually expressed as a percentage, and also known as market return.

When we asked Canadians 50+ how they would respond to an obviously fraudulent investment offer—a guaranteed 14% – 25% return, risk free—1-in-5 said they’d look into it. For them, the lure of high yield was more powerful than the common sense understanding of risk and return: the higher the return, the higher the risk.

We also asked Canadians what a realistic rate of return would be in today’s market. Fully 75% either didn’t know or expected higher—and sometimes much higher—returns than are now available. By our calculation, a reasonable yield these days is under 4%.

Having unrealistic expectations of market returns and not understanding the relationship between risk and reward can make people vulnerable to investment fraud. Especially, as our research shows, for those worried about low rates of return or afraid they will run out of money during retirement.

Being fraud aware means having the knowledge and perspective to spot scams and avoid them. Avoiding scams involves resisting the lure of too-good-to-be-true investments that might be an unproven business that could fail, or an out-right fraud. Sometimes the best investment we can make is to walk away.

If you’d like a little fun seeing where you stand on the fraud vulnerability front, take the InvestRight Investment Fraud Challenge. The lower your score, the less vulnerable you may be. And you might even win an iPAD2.

The BCSC InvestRight Fraud Vulnerability survey was conducted among 2,461 Canadians by Innovative Research Group in January 2012. The results have an estimated margin of error of +/- 2.0%, 19 times out of 20.

Do you use the Internet to research investments? When you search certain terms, do you look at the advertisements that show up in the results set? Have you ever clicked on one of those advertisements to take a closer look at a high-yield investment opportunity?

A recent educational campaign run by Canadian securities regulators shows that many investors would answer “yes” to all three of the above questions, confirming investors remain vulnerable to online investment fraud.

Last week, the Canadian Securities Administrators (CSA) released the results of a 10-week public education campaign that used online advertisements and social media promotions to point people to a video and website of a fictitious company, BlueHedge Investments. The goal of the campaign was to illustrate how scam artists use online tools to lure unsuspecting investors into fraudulent investment schemes.

The ads and website contain various investment fraud warning signs. Here are a few examples:

• Guaranteed high returns: BlueHedge offers 9% a month, risk-free investment.  There is no such thing. Every investment involves some level of risk.
• Offshore, tax-free: The offshore fund option says you pay no taxes. You may be able to reduce your taxes, but you cannot avoid them. Also, once your money is offshore, it’s going to be hard to recover if the investment goes sideways.
• High pressure sales: The “invest now” option, is an attempt to stop people from taking their time to consider the offer. Investing under pressure without doing your due diligence can have disastrous results.

The website also includes grammatical errors and references to FOREX (international currency trading), a highly complex and risky investment strategy scam artists often say they, or their expert traders, are engaged in.

Essentially, BlueHedge Investments resembles websites that are used promote investment schemes. The difference, of course, is that this website is set up to educate investors. If you click through to find out more about the investment offer, or you try to enter personal information into the website, you go to links with educational information. These materials include videos and links to materials pointing out how to recognize an online scam like BlueHedge Investments.

At the campaign’s conclusion, the BlueHedge website had received almost 18,000 visits from across Canada, with 71% of those arriving to the site because they clicked on online advertisements. We also found that more than 10 percent of those who received unsolicited e-mails from BlueHedge opened them. And, of those, almost 13 per cent clicked on the provided BlueHedge links, which took them to the website.

These results demonstrate people need to be very wary when dealing with online investment opportunities.

You can help us by getting the word out about the campaign. The website www.bluehedgeisntreal.ca is a great educational resource you can share with your friends, family, and coworkers.

If you are interested in looking at the original campaign website, you can find it at www.bluehedge.ca. The CSA’s website also has a full explanation of the campaign, including examples of the online ads.

Finally, we are running a Fraud Challenge contest at www.befraudaware.ca, where you will also find videos and information you can let people know about.

Last week, we published new research that found 43% of people surveyed did not understand the trade-off between risk and return, which is a basic market principle – the higher an investment’s rate of return, the higher the risk.

We know that no risk, guaranteed investments promising high returns are commonly offered by scam artists. With the low returns investors have been experiencing over the past five years (we said less than 4% in the survey), it’s important to understand fraudsters don’t have to offer extremely high returns to get an investor’s attention these days.

This is why we running our “Be Fraud Aware” advertising campaign across the province. We want people to understand how to recognize and report investment fraud.

As a part of our online campaign, we created the video: Fraudster Exposed.

In it, a fast-talking salesperson is shooting a commercial. On the surface, he seems like a well-intentioned financial advisor who is merely advertising another investment product.

However, as the video progresses, you will realize many of the features of this “product” indicate it is a scam. You will also find out his true colours in behind-the-scenes footage captured by the camera crew shooting the video.

We hope you enjoy the video and share it with friends and family members to show them how fraudsters target people and steal their money.

We also encourage you to enter our Fraud Challenge contest. It asks five questions to test your vulnerability to investment fraud. When you complete the contest, it will give you a score that you can share with your friends and family.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Vancouver 

InvestRight seminar

March 2

Private event

Victoria  

Small Change Expo  

Visit our Planning 10 Booth

March 9         12:00 pm - 8:00 pm

March 10       10:00 am - 6:00 pm

Attend our InvestRight seminar

March 9          3:00 pm - 4:00 pm

Victoria Conference Centre 720 Douglas Street Victoria

For tickets and information go to http://www.smallchangeexpo.ca/expo-info

Surrey 

Focus on Seniors Forum 

March 10

10:00 am- 3:00 pm

Guilford Recreation Centre 10470 – 152 Street Surrey

This event is free for all seniors - focusing on a Korean speaking audience.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.

Lunch will be provided. Lots of great prizes!

Seating is limited, so please register at:

• 604-501-5100 ( 8:30 am- 4:30 pm) Monday- Friday)
• Any City of Surrey ‘s Community or Senior’s Centres
• www.surrey.ca/register 

Kelowna 

BC Home & Leisure Show 

March  9          5:00 pm - 9:00 pm

March 10       10:00 am - 5:00 pm

March 11       10:00 am - 4:00 pm

Royal LePage Place 2760 Cameron Rd. West Kelowna

For more information go to http://www.bchomeshows.com/west_kelowna_home_show.html 

All welcome! Cost: Free

Burnaby 

InvestRight seminar

March 12

Private event

Vancouver 

InvestRight seminar

March 16

Private event

Langley 

InvestRight seminar

March 21

Private event

Kelowna 

InvestRight Seminar

March 26 am

Private event

Kelowna 

InvestRight Seminar

March 26 pm

Private event

Coquitlam  

InvestRight seminar

March 28

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen,

Program Manager, Outreach

Communications & Education

Email:arutherglenbcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

A national study of almost 2,500 older Canadians (50+), released for Fraud Awareness Month, found that almost 1-in-5 are vulnerable to a highly risky investment offer. More than 2-in-5 don’t understand the fundamental relationship between risk and return and only 1-in-4 have a realistic expectation of the current rates of return for their investments.

The BC Securities Commission engaged Innovative Research Group Inc. to prepare this report to develop a profile of older Canadians’ vulnerability to investment fraud.  It shows that Canadians 50+ who have unrealistic expectations about market returns and who do not understand the relationship between risk and reward are more likely to fall victim to a fraudulent investment offer. Fear of running out of money in retirement increases that vulnerability.

“When you combine the fact that many older Canadians don’t have a good grasp of what a realistic level of return is in the market with their lack of understanding about the relationship between risk and return, you have the perfect storm for con artists. This group is more vulnerable to promises of unrealistic returns, especially when the offer comes with the additional promise of no risk,” said BCSC Chair Brenda Leong.

The first question in the study tested older Canadians’ vulnerability by asking how they would respond to a clearly fraudulent investment offer. Over a quarter of Canadians 50+ demonstrated their vulnerability by saying that they either would look at it further (19%) or simply didn’t know (7%). These people tended to fall into the pre-retiree category.

The study also examined other circumstances that heightened vulnerability to investment fraud: those who regularly get involved in risky sales situations such as attending sales presentations; those with little or no savings set aside for the future; and those who have trouble making ends meet.

“This survey tells us that there are a number of significant factors today that make older Canadians vulnerable to investment fraud. The sheer number of Canadians approaching retirement, the current low interest rates and market returns, and the lack of understanding of the fundamental relationship between investment risk and return suggests that we, as regulators have to be as vigilant in helping to protect investors.

“What investors need to understand is that when they are tempted by products with higher than average returns, they are typically being offered high risk investments: unproven businesses that could fail or in some cases, out-and-out frauds,” said BCSC Chair, Brenda Leong. “Investors also need to be vigilant.”

To help people understand the warning signs of investment fraud, the BC Securities Commission is launching the second phase of its three-year “Be Fraud Aware” campaign. 

It includes radio and newspaper ads, a Guide to Investment Fraud newspaper insert and mail drop in population centres with a high proportion of older Canadians, a YouTube video and a province-wide fraud literacy contest. The first phase of the campaign, launched in the fall of 2011, was aimed at the Chinese and South Asian communities, who represent 40% and 26% respectively of BC’s minority population.

This national on-line survey of 2,461 Canadians aged 50 years and older, was conducted in English and French between January 11 and 23^rd, 2012.

La Commissions des valeurs mobilières de la Colombie-Britannique publie son rapport national
sur la vulnérabilité face à la fraude liée aux placements 

Une enquête nationale menée auprès d’environ 2 500 aînés (personnes âgées de 50 ans ou plus), dont les résultats sont rendus publics à l’occasion du Mois de la sensibilisation à la fraude, révèle que près d’un aîné sur cinq est vulnérable face aux offres de placement à risque très élevé. Plus de 40 % d’entre eux ne comprennent pas le lien fondamental qui existe entre le risque et le rendement d’un placement et seulement le quart des aînés ont des attentes réalistes quant au taux de rendement de leurs placements à l’heure actuelle.

La Commission des valeurs mobilières de la Colombie-Britannique (British Columbia Securities Commission, ou BCSC) a confié cette étude à l’entreprise Innovative Research Group  dans le but d’obtenir une analyse de la vulnérabilité des aînés face à la fraude liée aux placements. Les résultats montrent que les Canadiens et Canadiennes âgés de 50 ans ou plus qui ont des attentes irréalistes face au rendement des placements et qui ne comprennent pas la relation entre le risque et la récompense sont plus susceptibles de tomber dans le piège des offres de placement frauduleuses. La peur de manquer d’argent au cours de la retraite vient s’ajouter aux facteurs qui contribuent à cette vulnérabilité.

« Bon nombre de Canadiens plus âgés se savent pas quel est le niveau de rendement auquel on peut réalistement s’attendre sur les marchés financiers et ne comprennent pas la relation qui existe entre le risque et le rendement, fait remarquer la présidente de la BCSC, Brenda Leong. Ces gens-là sont des victimes parfaites pour les escrocs, car ils sont davantage disposés à croire à la promesse de rendements élevés, surtout si on leur dit que le placement offert est sans risque. »

La première question posée dans le sondage cherchait à mesurer le degré de vulnérabilité des aînés en leur demandant quelle serait leur réaction si on leur offrait un placement nettement frauduleux. Plus du quart des répondants ont révélé à quel point ils sont vulnérables en répondant qu’ils se pencheraient sur une telle offre attentivement (19 %) ou qu’ils ne savaient pas comment ils réagiraient (7 %). Ces personnes avaient tendance à se situer dans la catégorie des gens en phase de pré-retraite.

L’étude se penche également sur d’autres comportements des aînés qui font qu’ils peuvent plus facilement être la proie des fraudeurs : les investisseurs qui s’exposent régulièrement à des situations où ils risquent de se laisser leurrer par de beaux boniments; ceux qui consultent des amis ou des membres de la famille avant de faire un placement; les personnes qui n’ont pas mis d’argent de côté pour l’avenir; les gens qui ont de la difficulté à joindre les deux bouts.

« Cette enquête montre que plusieurs facteurs importants ont pour effet de rendre les personnes âgées vulnérables face à la fraude financière, souligne Brenda Leong. Vu le grand nombre de Canadiens et Canadiennes qui s’approchent de l’âge de la retraite et les faibles niveaux des taux d’intérêt et des taux de rendement du marché, vu aussi qu’il y a beaucoup de gens qui ne comprennent pas le lien fondamental entre le risque et le rendement d’un placement, il est clair que les organismes de surveillance doivent être aussi vigilants que possible afin de protéger les investisseurs.

« Il importe également, ajoute la présidente de la BCSC, que les investisseurs sachent que, lorsqu’ils se laissent tenter par des placements assortis de rendements nettement supérieurs aux taux du marché, ils s’écartent de la norme des marchés financiers pour investir dans une entreprise à risque très élevé, qui n’a pas encore fait ses preuves et qui risque de faire faillite ou même de s’avérer être une fraude de bout en bout. »

Pour aider les gens à déceler les indices qui laissent présager un placement frauduleux, la BCSC lance la deuxième phase de sa campagne de sensibilisation à la fraude (Be Fraud Aware).

Cette phase comprend des publicités dans les journaux et à la radio, un encart dans les journaux consacré au guide sur les placements frauduleux (Guide to Investment Fraud), une campagne de publipostage dans les agglomérations où vivent un grand nombre de personnes âgées, un clip vidéo sur YouTube et un concours provincial sur la sensibilisation à la fraude. La première phase de la campagne, entamée à l’automne de 2011, s’adressait aux communautés ethniques chinoise et sud-asiatique de la Colombie-Britannique, qui représentent 40 % et 26 %, respectivement, des populations minoritaires de la province.

Le sondage de Innovative Research Group a été réalisé, en français et en anglais, auprès de 2 461 Canadiens et Canadiennes âgés de 50 ans ou plus, du 11 au 23 janvier 2012.

With the RRSP deadline creeping up (it’s February 29), many of us are trying to figure out where to put our contribution. Historically low interest rates, lacklustre returns, and protracted stock-market volatility make this decision even more difficult.

Unfortunately, the uncertainty of today’s economic climate presents another challenge for RRSP investors – it is ideally suited to investment fraud.

There are unlimited opportunities to target investors by promising quick, solid returns with little or no risk. This pitch is the calling card of almost every fraud artist.

So, before rushing into an RRSP investment, you need to do some research about the person you are dealing with and the investment you are considering. You can use several free tools provided by Canadian securities regulators.

Check registration  

• The National Registration Search contains the names of all registrants (individuals and firms) in Canada, with the exception of those registered solely with the Ontario Securities Commission. If the person you are dealing with does not hold registration in BC, call us at 1-800-373-6393.  

Check disciplinary history  

• The CSA’s Disciplined Persons List contains information relating to persons that regulators in Canada have disciplined. If you find the person you are dealing with on this list, read the supporting documents carefully. If the person was sanctioned for fraud, illegal distributions, or other significant violations, you would be wise to invest your money elsewhere.  

Check for unqualified investments or unregistered firms 

• Among other things, the BCSC’s Investment Caution List provides investors with the names of unregistered brokerage firms and businesses outside BC that have unqualified investments. This list is not exhaustive. If the firm you are dealing with, or the investment you are considering is on this list, call us immediately.  

Check out private placements and real estate investments 

• Read the “private company investing” section of our website to get a better understanding of this type of investment. If the investment is in real estate, you should also look at our recent Investor Watch on the topic.

At this time of year, it can be difficult to resist an investment opportunity, especially when you are up against a hard deadline.  However, it is not worth handing your RRSP contribution to someone you haven’t checked out, or putting your money into an unsuitable or fraudulent investment.

If you are looking at purchasing a mutual fund this RRSP season, you will want to take advantage of a relatively new document that contains key information about mutual funds.

This document, known as Fund Facts, includes a description of the mutual fund, as well as answers to important questions you should be asking when you are making any type of investment.

Some of the questions the Fund Facts document poses are:

What does the fund invest in? 

• This is where you will find a snapshot of the fund’s holdings, including the top 10 positions of the fund, what percentage of net asset value they represent, and the investment mix.

How has the fund performed? 

• Here you will find past performance of the fund, with average and year-by-year returns going back 10 years if the fund has been around that long. If not, this section will show the fund’s performance from the date it was created and became a reporting issuer. Returns are after the deduction of expenses, which can reduce the fund’s returns. 

Who is it for? 

• This part of the document discusses suitability – the kind of investor and the type of portfolio the mutual fund is designed for.  

How risky is it? 

• This section contains a table with a risk rating. There are five ratings available for the fund to use: “low”, “low to medium”, “medium”, “medium to high”, and “high”. The fund will identify which category it falls under using the risk classification methodology chosen by its manager.  

How much does it cost? 

• If you want to know what you are paying in various fees, you will want to go over this section in detail. This is where you will find explanations about sales charges, fund expenses – including the Management Expense Ratio (MER) and the Trading Expense Ratio (TER) – trailing commissions, and other fees.

The Fund Facts document also contains a “Quick facts” section, which gives you an overview of the fund, including its value on a particular date, who manages it, and the required minimum investment, among other things. Additionally, there are sections in Fund Facts where you can find out about guarantees, and how tax rules and rates may affect it.

In July 2011, Canadian securities regulators required companies to make Fund Facts available to investors, so it should be available on the website of the company that is offering the fund. You can also request it from the person who sells you the mutual fund or search for the document you are looking for at SEDAR.com.

Finally, below are some links to a few articles about Fund Facts that you may want to review.

Fund fact sheets can help you help yourself, The Globe and Mail

Fund Facts – The answer to every advisor’s prayer?, Financial Post

Helping out with Fund Facts, Investment Executive

Watch for our final RRSP post next week.

If you are like many Canadians, you are probably just turning your attention to your RRSP and retirement portfolio. In fact, it may be the first time you’ve contemplated your retirement plan in a year, so you should probably sit down and do some reading before heading in to see your financial advisor.

This post points you to some tools and information that can help you during this RRSP season and beyond. After all, you should be checking in on your portfolio and keeping your financial plan in mind throughout the year.

Tools:  

InvestRight Guide to Investing: How to make informed decisions 

• A free publication available in PDF format. You can download it to your computer, load it onto a tablet, or print it off for quick reference. It gives practical guidance on how to choose (or change) your investment advisor, and provides forms you can use to document your financial position and goals. 

InvestRight’s Risk Test and About Investments section 

• The Risk Test is a good way to discover your personal risk tolerance, and the About Investments section of the website will allow you to learn about different types of investment products and the risks associated with them. Going over this section will help you discuss products your advisor might put in front of you when you meet about your RRSP. 

Get Smarter About Money’s calculators 

• The Investor Education Fund provides an RRSP savings calculator and Mutual Fund fee calculator on its website. There are also a number of other useful calculators on this site.  

Before You Invest blog 

• A recent post on this blog from the Nova Scotia Securities Commission asks:  Do you know when the 2012 RRSP deadline is? The post also links to another article titled: What exactly is an RRSP anyway? Both of these articles are great quick references for people who are contributing to an RRSP for the first time. 

IIROC’s Guide to Trading on Equity Markets 

• The Investment Industry Regulatory Organization of Canada (IIROC) provides this free resource to help investors understand how equity trading works, and their rights and obligations when trading on equity marketplaces. 

CBC: Special Report: RRSP Season 

• This section on the CBC’s website has analysis, articles, and tools you can use to get current information on topics related to retirement and retirement planning.  

Globe & Mail’s 29 Ways in 29 Days 

• This special feature in the Globe’s RRSP section discusses various investing-related topics over the month of February.  

If you have any other suggestions, please let us know through our comment section.

We’ll be following this blog post up with two more posts in the coming weeks. Our next post will talk about Fund Facts, and our third instalment will present some more tools you can use to protect yourself from fraud.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month: 

Vernon 

InvestRight seminar

February 2

Private event

New Westminster 

InvestRight and Top 10 scams seminars

February 7

New Westminster Public Library  716 6^th Ave.

BC Securities Commission and the Better Business Bureau of Mainland BC will give presentations on how to protect yourself from financial fraud and other common scams.

This is a free presentation

To register call 604-527-4660

For more information go www.nwpl.ca  

Victoria 

InvestRight seminar

February 14

Private event

Kelowna 

InvestRight seminar

February 15

Private event

Kelowna 

InvestRight seminar

February 16

Private event

Surrey 

February 18

Focus on Seniors Forum

9:00am-3:00pm 

Fleetwood Community Centre, 15996 84^th Ave. Surrey

This event is free for all seniors - focusing on an English speaking audience.

Lunch will be provided. Lots of great prizes.

This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey. Adult family members are welcome to attend.

Seating is limited, so please register:

• Call 604-501-5100 (8:30-4:30 Mon- Fri)
• At any of Surrey’s Community or Seniors Centres
• www.surrey.ca/register 
• Course # 4287558

Vancouver 

InvestRight Seminar

February 21

Private event

Victoria 

InvestRight Seminar

February 22

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Program Manager, Outreach

Email:arutherglen[at]bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

In October, we launched a new campaign in BC’s ethnic communities to encourage people to “Be Fraud Aware”. This campaign will be a three-year effort aimed at increasing people’s knowledge of investment fraud and its impact on tight-knit religious and ethnic communities. 

Today, the campaign is entering its second phase, with advertising running in the local Chinese and South Asia media.  

We’ve added the video below to our YouTube page. It will serve as an introduction to the campaign for people who may not see the campaign on TV or in the newspaper.  

As part of the initial campaign launch, we published a Chinese, Punjabi, and English website. This website includes important information about how to recognize and report investment fraud. There are also printable, full-colour brochures and posters that we hope people will download for their own use and post in places where friends and family gather to meet or worship.  

Let us know what you think of the video, the websites, or the materials in the comment section below.  

Last week, the Vancouver Sun ran a series on pensions that explored what retirement is looking like for an aging population of Canadians – from living longer, to having an adequate pension (or not), to paying off household debt.

We were able to add our voice with an opinion piece that ran in today’s paper. In the piece, we talk about the ongoing uncertain economic environment. This situation has produced a new reality for people looking at retirement that includes low interest rates, as well as lacklustre returns and protracted volatility in conventional markets.

This kind of economic environment creates uncertainty for those looking for a steady retirement income that will keep them near their current standard of living. In our piece, we argue that this uncertainty creates a potential for investment fraud.

This is because fraud artists see unlimited opportunities to take advantage of investors in search of quick, solid returns. They prey on the most vulnerable – those who are trying to find ways to pay for their retirement in a hurry, and seniors who want to supplement their fixed incomes.

We know British Columbia is fertile ground for fraud artists because we have large concentrations of seniors and pre-retirees in the Lower Mainland and on Vancouver Island. 

A 2009 national study by the Canadian Securities Administrators found that BC is 10% higher than the national average when it comes to being approached with an investment scam. That fact coupled with the finding that British Columbians are the most likely to say that they have an aggressive investment style, (with 38% agreeing with that statement), suggests that BC residents may be particularly vulnerable to investment fraud.

Research has also shown that over-confident men in their 50’s represent one of the most susceptible groups of investors.

So what can people do to protect themselves? They can learn to recognize the five warning signs of investment fraud. Take some time to read over this section of our website if you are retired or thinking about retirement.

The best defence against fraud is a savvy and sceptical investor who recognizes fraud artists and the investment scams they promote.

During the year, InvestRight ambassadors travel around the province to give seminars, attend tradeshows, and talk to people who raise awareness about investment fraud in their communities.

On one of our recent visits to Kelowna, we were able to sit down with Constable Ann Donnelly, of the Kelowna RCMP, to discuss her experience with scams and fraud in that community. She’s been a fraud investigator for seven years, and has seen all types of scams – including investment fraud.

We are posting this video of our conversation in order to promote fraud awareness. The video is about four minutes long, and is available on our YouTube channel if you want to share it with friends or family. Let us know what you think by posting a comment below. We hope to make more of these in the future, so your feedback is welcome.

If you want more information on how to protect yourself and your community from fraud, check out our Investor Protection section. We also have nearly 40 videos on our YouTube page that discuss how to invest wisely and protect yourself from fraud.

Recently, I’ve noticed a couple of investment schemes reported in the news that were promoted on social media websites.

In one case, the SEC charged an Illinois-based investment advisor with offering fictitious securities on LinkedIn, a well-known social media site used by professionals (including myself) to expand their networks and industry knowledge.

The SEC is alleging that Anthony Fields offered more than $500 billion in fictitious investments to people through discussions on the website. The news release goes on to say that Fields’ offer attracted interested investors. The release also includes education materials related to social networking that provide helpful advice for investors.

In another case, the Texas State Securities Board (TSSB) announced it was returning money to 43 investors from an investment scheme it had investigated. The TSSB said its investigation of Warr Investment Group and its CEO, James Elton Warr, revealed they were selling investments in a fraudulent real estate program, which the respondents promoted through YouTube and Internet advertising.

A few years ago, we issued an Investor Watch warning people of the dangers of online investment groups and meet-ups. We later turned the Watch into a video podcast that has been quite popular on our YouTube page.

Since releasing these materials, the use of social media sites for networking and communicating has become the norm for many people – Facebook claims to have 800 million users, and YouTube claims that users view over three billion videos every day. Twitter and LinkedIn also claim to have hundreds of millions of users.

In my experience, once something becomes second nature – like checking your status updates or accepting new “friends” on social networks – people tend to let their guard down. Since we tend to trust our friends, it makes sense that we would be open to checking out products or services they are using.

This is where the scam artist comes in. If he can become your online “friend” or get someone you know interested in a product, there is a good chance others in your network will hear about it. Once this happens, there is the possibility that the scam artist could attract investors thought word-of-mouth. This is what we see in many investment scams, which we call affinity frauds.

To protect yourself and people you know from falling victim to this type of fraud, there are a number of things you can do.

• Exercise caution when accepting friends or talking to people on social networks
• Do a background check on people selling investment products
• Seek independent advice when considering an investment
• Report any suspicious investment offerings you see on social networks to a securities regulator
• Be fraud aware, and know the warning signs of investment fraud 

The Globe and Mail’s Rob Carrick recently wrote about how unhappy many boomers are today about their lacklustre portfolios, just at a time when they are seriously considering retiring or have already made that decision. A recent comment on our Facebook page reflects this concern as well.

For years, myself included, we counted on our financial advisors to provide advice and decisions about our investments and the results were pretty good. However, those days are long gone.  The markets are volatile; the products are complex; and the returns much lower.

So here’s the challenge. Most of us don’t have any investor training or education in our backgrounds.  So we are all trying to figure what to do improve our circumstances to prepare for retirement.

One of the first things many of my friends did after 2008 was to move their accounts to new advisors.  The act of doing it was the first sign that they were recognizing the need to take more responsibility for managing their money.

We have a Guide to Investing, which gives lots of advice on how to go through that process, questions to ask, research to do. (Chapter Two)

We also give you the basic questions to ask your advisor when you are seeking investment advice: 

• Is it suitable for me? 
• Where are the risks? 
• How does this investment make money? 
• Does this investment come with a guarantee?
• How much will it cost me?
• Are there better alternatives?
• What research can I do to verify what the advisor is telling me?

By starting with these basic questions, your advisor will begin to see that you are not a passive client, but one who is paying attention.  The result should be that your advisor becomes even more diligent because he or she knows that you will demand credible answers to your questions.

The investor in the Globe column says, “People aren’t pushy enough asking questions.” And Carrick concludes with this: “Get ready, investment industry.  Exam time is coming as baby boomers retire and start to look at what decades of saving and investing got them.”

I hope that it is a wakeup call for all retail investors to pay more attention and be more diligent in overseeing their investments in order improve their financial future.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month: 

Vancouver 

InvestRight seminar

January 13

Private event

Lantzville 

InvestRight seminar

January 19

Private event

West Vancouver 

InvestRight seminar

January 23

Private event

Vancouver 

AME BC Mineral Exploration Roundup

January 23 & 24

10:00 am – 5:00 pm

Westin Bayshore 1605 Bayshore Drive

For more information and registration go to http://www.amebc.ca/roundup/overview-2012/Exhibitor-Trade-Show.aspx 

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, seniors' organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator

Email:arutherglen[at]bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

British Columbia Securities Commission staff added six new names to its Investment Caution List in December, including a company that was permanently cease traded by a BCSC panel.  

On Dec. 13, 2011, BCSC staff put Fortune Investment Group (FIG) on the Investment Caution List. Later in the month, a commission panel held a hearing against FIG, High Profit Investment Ltd. (HPI), Martin Butcher, and Robert Meeker. The panel issued permanent cease trade orders against the parties.

HPI and FIG were approached by a BCSC investigator posing as a potential investor. In both instances, the investigator received a response via email that reiterated many of the false statements contained on the companies’ websites, in addition to aggressive requests for money orders in US dollars. You can read more about the case and the panel’s decision in the BCSC news release. Butcher and Meeker are now on the national Disciplined Persons List.

On Dec. 15, 2011, the Ontario Securities Commission (OSC) issued an investor alert cautioning investors not to purchase securities from BluePort Capital Corp. BCSC staff then placed the company on the Investment Caution List. The OSC issued the alert after it suspended BluePort’s registration. Prior to the suspension, BluePort was registered as an exempt market dealer in Ontario.

On Dec. 6, 2011, Macro Trade and Forteco Trading Ltd. were added to the Investment Caution List after one of the companies was brought to the attention of BCSC investigators. Macro Trade claims to offer financial services and online trading accounts to investors. It also claims to be owned by Forteco Trading.

Staff also put two other companies on the Investment Caution List on Dec. 6, 2011. Max Tech Oil and Trinidad Oil & Gas Corporation were added to the list after another provincial regulator alerted BCSC investigators that Max Tech Oil had solicited an investor to purchase an interest in an oil well in Texas that Trinidad Oil & Gas operated.

None of the six companies are registered in BC to trade in, or advise on, securities or exchange contracts. Additionally, Max Tech Oil and Trinidad Oil & Gas Corporation have not filed a prospectus with the BCSC.

The BCSC urges investors to use extreme caution when dealing with firms that are not registered in BC.

Scam artists love the holidays and will use your good intentions of giving to their advantage. Be an informed investor and learn the warning signs of fraud this season with this Christmas-themed song. Sing the InvestRight Carol (sung to the tune of Silver bells)

Holiday season, is the reason

To be watchful of scams

Con artists

come ou - out in full force

They ‘ll get to know you,

Pretend they like you

And promise high returns

But, all they want to do is rob you!

CHORUS 

Be fraud aware, get the Guide 

InvestRight is here to help you 

Subscribe to our blogs, recognize the frauds 

And re-port those pushing the scams 

They will cold call

Hold a seminar

Lure you in the best they can

Everything just sounds

So-o amazing

They’ll offer offshore

No risk tax-free

What a great opportunity

You’ll be pressured to get in quickly.

CHORUS 

Who’s a con artist?

What do they look like?

How will you recognize them?

When they look just like

You-u and me-e.

Your family likes him

Your pastor trusts him

So why shouldn’t you?

Why should you be left out of this deal?

CHORUS 

Who’s a con artist?

What do they look like?

How will you recognize them?

When they look just like

You-u and me-e.

Give your family and friends the gift of InvestRight this season, so we can all be fraud aware.

During the holidays, many of us feel the need to give to those less fortunate. Be aware! Scammers feel the same need - but they feel the need to empty your pockets.

Some of us donate throughout the year, and during this holiday season we like the opportunity to give to new and different charities. Scammers will try get you to donate to charities that use names that are very close to the names of legitimate charities. Check it out! The Canada Revenue Agency maintains a searchable list of Canadian charities.

This time of year, we go to great lengths to find the ultimate gift for family or friends. Scammers will post rare and unusual items on the internet. Is this really a good deal or is it a scam? Shop around. Ask questions. Do your research. You just may end up with a bad debt instead of a good intention.

Give your holiday shopping and donating the same care and attention you give to your investments.  As we say ‘Be an informed investor’.

• Know your advisor. Who is selling you this charity or gift?  Have you heard of this before?
• Know yourself-what is your risk tolerance – or- how much are you willing to spend?
• Know your investments – what is it you are wanting to donate to or buy? Is this charity real?

Investigate before you invest and enjoy your scam free holiday season!     

Last month, a colleague and I presented the BCSC’s Investright seminar to a group of 50 retired business and professional people in Ladysmith BC. We discussed tips on how people could protect themselves from fraud and how to avoid unsuitable investment products.

Investor questions 

When we participate in events or give seminars, there are always great questions about who we are and what we do. Below are three answers to questions that we thought would be useful to share with our online audience.

Are offshore-listed companies risky? 

This question arose from one of our warning signs of investment fraud when an investor is told that their money is going offshore so they don’t have to pay taxes. This warning sign does not apply to listed foreign companies, which are a big part of Canada’s market place. However, whenever a listed company operates in a jurisdiction with different legal and accounting environments, these differences lead to additional risks that investors should consider beyond those that would apply to an equivalent Canadian company.

Does the BC Securities Commission cooperate with other regulators in Canada? 

We work with securities regulators across Canada and around the world to share information and conduct investigations. Many of the cases we’ve seen recently involve parties in multiple jurisdictions, leading us to cooperate with regulators in those jurisdictions. We tend to focus our efforts on individuals and companies based in BC who are alleged to have acted contrary to the public interest, and cases where investors are based in BC.

Are securities covered by CDIC insurance? 

It is useful to ask your advisor whether the product you are considering is covered by insurance from Canadian Deposit Insurance Corporation (CDIC) or some other investor protection fund.  Most securities are not covered by CDIC insurance because that insurance protects money deposited in Canadian banks and certain other financial institutions from failure by that institution. 

Other investments may be protected by investor protection funds, such as Canadian Investor Protection Fund (CIPF) or the Mutual Fund Dealers Association’s Investor Protection Corporation (IPC).  Whether you will be eligible for this coverage will depend on where your advisor works.  This recent article in the Financial Post describes in laymen’s terms how CIPF works. 

None of these funds protect against market losses or fraud that does not lead to insolvency.  All have limits on coverage, ranging from $100,000 to $1,000,000. 

For more answers to questions that people ask us, go to our Questions & Answers section of our website.  You can also send us your questions by commenting on this post.

If you are part of a group of 20 or more would like to have the BCSC come and present InvestRight in your community, please contact:

Anne Rutherglen, Communications Coordinator

Email: arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

I’ve worked at the BC Securities Commission for nearly five years, and I often find myself explaining to people who we are and what we do. In my experience, people who don’t invest, or count themselves as investors, don’t spend a lot of time thinking about securities regulation or investment fraud.

This is fair. Securities regulation can be difficult to understand, and fraud is something people don’t usually consider until it happens to them or someone they know.

That said, if you’re interested in how companies raise money in BC economy, the size and scope of our capital markets, or how you can help others avoid investment fraud, you may want to read two speeches our chair, Brenda Leong, gave recently.

In her speech to the Hong Kong Business Association, Leong spoke about the BCSC’s role in regulating the province’s capital markets. She also talked about how the commission is working to make the province a good place for investment and investors.

Her speech begins with some interesting and revealing stats about BC’s capital markets. For example, did you know that Vancouver, not Toronto or Calgary, has the most head offices of publicly traded companies in Canada?

She goes on to talk about the role of the BCSC in creating reputable capital markets, where investors only have to worry about the legitimate business risks facing a company. This includes a number of initiatives that require a combination of sound regulatory policy, active compliance and enforcement work, and proactive investor education.

“Simply put,” she says. “Our goal is to provide the best balance between investor protection and market efficiency.”

In her second speech to the Vancouver branch of the Association of Certified Fraud Examiners, Leong discusses in detail what the BCSC is doing to protect investors.

She starts by explaining how the Internet is tailor-made for those who use fraudulent investments to steal people’s money. She then goes on to talk about how the BCSC is combating fraud, both on the Internet and on the ground.

Leong presents the audience with a number of case studies that provide interesting insights into how investigators and examiners work. The examples illustrate how important it is for the public and financial institutions to be our eyes and ears on the ground.

Throughout the speech, she illustrates how the BCSC uses both old and new tools to discover and take action against people who engage in market misconduct.

Together, both speeches paint a good picture of what we do. They are available to the public on our corporate website. Here are the links.

BC’s Capital Markets: A Major Engine of Growth for Canada’s Economy, Brenda Leong’s speech to the Hong Kong Business Association

Securities Fraud: New Threats from an Old Foe, Brenda Leong’s speech to the Association of Certified Fraud Examiners, Vancouver Branch

The recent collapse of MF Global once more reminded us that we have in place an important safety net for investors whose brokerage firm faces bankruptcy. MF Global, as US based securities firm, collapsed on October 31, 2011 after making disastrous bets on European debt. Its Canadian subsidiary filed for bankruptcy four days later.

In this case, the process may not have been perfect, but the outcome is pretty good. Canadian clients have had their accounts transferred, intact, to other brokerage firms and it doesn’t look like anyone lost money.

Here’s how it works in Canada.  We have the Canadian Investor Protection Fund (CIPF) which was established by the investment industry to ensure the return of assets belonging to eligible customers if a member becomes insolvent.

First, you have to be doing business with a dealer member of the self-regulatory Investment Industry Regulatory Organization of Canada (IIROC).  It’s over 200 members make contributions to the CIPF of up to 1% of their revenue annually.  Over the past 40 years, its members have contributed up to $36 million and no eligible customers have lost  their assets.

To be eligible, your investment must be acquired and recorded in your client account. Your loss must be the result of insolvency, not from a major downturn in the marketplace, an unsuitable investment, or the default of an issuer of securities.  Assets may include cash, securities, commodities, futures contracts, segregated insurance funds and other property.

There is a limit of $1-million for a customer’s general account and $1-million for each separate account. The CIFP's detailed coverage policy is available on its website.

It’s comforting to know that Canadian dealer bankruptcies are rare. Since 1969, there have been only 17.  But it is even more comforting to know, that if it happens to you, and your firm is a member of CIPF, you will be able to recover up to a million dollars/per account of your money.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Prince George 

InvestRight seminar

December 1

Private Event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

In the past few years, financial literacy has become a hot topic. Designating November as financial literacy month in Canada is another positive step in raising awareness and encouraging dialogue around the subject.

In writing some blog posts this month, and reading over our National Report Card on Financial Literacy, I came to the realization that it is tough to convert positive thinking into results.

Our survey found that the kids we surveyed had good attitudes toward financial literacy, but they weren’t necessarily turning this into good behaviours.  Here are some results to make the point that kids tend to “talk the talk”, but they don’t necessarily “walk the walk”:

• 93% believe it is important to learn about finances at an early age
• 93% believe it is important to build up personal savings
• 60% believe it is important to have a written financial plan

When it comes to acting on these beliefs, we get a different picture:

• Less than half keep a budget to record income and expenses
• 4-in-10 don’t know how much they earned or spent last month
• Only 1-in-10 have written financial plans

The study also shows that financial literacy courses need to be both comprehensive and delivered in an effective and interesting format to have an impact. This is certainly something we can ask of the education system, but it’s not enough to get kids on the right path.

For the most part, kids report learning about personal finance from their parents or family (66%), followed distantly by a course in high school at 10%. This stat may surprise many parents – yes, your kids are listening, watching, and learning from you.

So, knowing this how can we help? Here are a few suggestions that may be worth thinking about.

First, we know that Canadians need adults to start acting on our attitudes when it comes to investing and savings. The 2009 CSA Investor Index found that only one-in-four Canadians say that they have a formal written financial plan, despite the fact that two-thirds agree that having a plan is important for people like them.

Perhaps, bringing our children into the planning process would be a good idea. They are very much a part our financial lives, so let’s involve them. We don’t have to reveal all the family finances, investments or debt, but we could certainly talk to them about how they fit into the picture with regards to expenses, education planning, etc.

Second, we know from the same survey that most Canadians (85%) believe that it is important to build up their own personal savings and investments, but 35% do not have any savings or investments, an increase from 27 % in 2006.

To teach savings, money could be set aside money in a special savings fund – maybe for this year’s vacation, a family outing, or a nice dinner. This would be an opportunity to involve our kids in the planning and budgeting process before, during, and after the event.

This could start with a News Year’s resolution to save more. This kind of project would also open the discussion around the types of financial products that are used to save money and which one might be best to realize the goal.

Third, we should find out when our kids are taking financial literacy courses at school. In B.C., kids learn about financial life skills in Grade 10. As we’ve discussed before, we offer a free resource to teachers to teach the course. Ask your kids about it, and have them run you through some of the material. It’s really interesting.

Obviously, as a parent or family member, you need to strike a balance. If you put on too much pressure or get too involved, kids will tune you out. Nevertheless, a little give and take can go a long way.

Maybe opening the window into the family’s finances a little is a good first step in getting kids acting on what seem to be solid attitudes toward financial literacy.

Let us know if you have any other ideas or experiences that help kids learn better financial life skills.

We released our National Report Card on Youth Financial Literacy to coincide with the launch of Canada’s first Financial Literacy Month. The media response to the survey has been excellent.

They focused much of their attention on the incredible optimism of these kids. For example, when asked how much they’ll be making in 10 years, the average answer was $90,000. The actual average wage for that age group is just over $31,000.

It’s obvious from the findings that there is a need to temper their enthusiasm with some realistic thinking. One way to do this is by introducing financial literacy programs into schools.  However, the study also showed us that rushing financial literacy courses into the schools could do more harm than good.

“Simply having taken a financial literacy course or not having taken one at all has little impact on financial attitudes, behaviour, and knowledge,” the survey concluded. “To have an impact, courses need to be both comprehensive and delivered in an effective and interesting format. Having a bad course experience produces financial literacy outcomes similar to having not taken a course at all.”

When I read this finding, it resonated with me. I struggled in Grade 11 math class. This wasn’t because I was bad at math – it was just that the course wasn’t interesting, nor was it being taught well. In the end, I got a decent grade, but I struggled the next year because of the experience I had in Grade 11. It wasn’t until college when I took a mathematics class that was well taught that I started to enjoy the subject again.

In our experience, creating a good course for students and teachers takes a lot time and effort. The BCSC has been at it since 2004, providing a free The City: Financial Life Skills for Planning 10 resource to BC teachers. We’ve worked hard to ensure it is contemporary and meeting teacher’s needs, including a completely updated version that was published last fall. We know teachers like it, because teachers in all of BC’s school districts use it.

We also know that it is important to train teachers how to use the resource.

We have learned that most teachers never took a financial literacy course in high school. So, we’ve even taken it a step further, and now do workshops with student teachers to introduce them to our resource and to show them how to teach financial literacy in a way that will get the students involved.

So far, so good.

BC and Alberta performed higher than the national average on the financial literacy test that was included in the survey –  42% of BC graduates scored an “A” or higher followed by Alberta graduates at 37%, above the national average of 35%. 

One explanation for this result is the fact that BC and Alberta both have comprehensive financial life skills courses in their high school curriculum. Another reason could be that the courses are well taught, and enjoyed by the students who take them. While we did a little bit better in BC than the rest of Canada, we have no reason to be smug.  We too have a long way to go before BC can say it has done its job.

Whatever the explanation, most of us can probably agree that kids, like adults, respond well to courses that capture their interest and imagination.

With this in mind, it would be great to hear some ideas from you on how we can better teach financial literacy. Let us know what you think.

A few months ago, I talked about allowance charts for kids. Since this month is financial literacy month, I thought I’d follow-up and share some of the results I’ve seen from our chart system after I read a Globe and Mail article that discussed the best age to teach financial literacy.

The experts quoted in the article didn’t necessarily agree on the exact age you should start teaching about money, but they all argued it is good to start kids at a fairly young age.

In my opinion, a good, healthy relationship with money is something that should start from a very young age. Our kids are five and almost three. We started the allowance charts when they were both about two and a half.

We give our kids stickers for doing chores around the house. I don’t feel comfortable just handing them money. I think they need to understand that it is something you earn. They have a say in the types of chores they do, and we ensure the tasks aren’t too difficult. We’ve changed the charts a few times to reflect their opinions and input.

At the end of every week, we tally up their earnings (it’s anywhere from $1 to $2 a week). We pay them, and then have them deposit their money into talking piggy banks that tell them how much is in the bank. We also put money they receive from grandparents, etc. into the banks.

A couple of weekends ago, I decided it was time to use some of the money from their savings. They had both built up a decent balance. Before heading off to the toy store we had agreed upon, I set a budget (our eldest son was allowed $20 and the youngest $15), and told them both that we’d put the rest of the money into their savings accounts.

When we arrived at the store, it took them quite awhile to choose what they would like. As you can image, setting a young child loose in a toy store is a dizzying affair.

My five-year-old looked at 30 or 40 items. During the selection process, we discussed whether the price of every item was within their budget, and we talked a lot about value – how much he’d use the particular item and whether he would enjoy it. My younger son made his choice quickly, but still went through a few items before making his choice.

In the end, they both came in well under budget. They also bought items they are getting a lot of use out of – the youngest sleeps with “Zella”, the stuffed zebra. The eldest “races” his new car almost every night.

After going through this exercise, I’m finding it easier to explain to them why we don’t buy everything we see when we go shopping. For example, they were both coveting toy cars during a grocery-shopping trip the other day. I explained the cars weren’t in the budget, and my eldest stopped asking for them immediately. It took longer with the youngest, but that’s to be expected.

This week, we will head to the bank to deposit the money they saved to close the loop on the lesson. I will also talk to them both about making a small donation from their savings, to teach them about charitable giving.

My takeaways from this exercise are threefold:

1. I realize that you can teach kids about saving and spending at a very young age.
2. As they grow older, it’s easier to teach them about value and decision making when it comes to making purchases.
3. If I want my kids to have a healthy relationship with money, I’m going to have to work hard to keep reinforcing these lessons. I will also have to think about new ways to talk about saving, earning, and charity, as they grow older.

Let me know about your experiences teaching kids about money.

We recently commissioned a national study asking youth (high school grads 17-20 years of age) questions about their expectations, behaviour and attitudes towards money. 91% were enrolled in post secondary courses.

Media coverage of the study focused on the incredible optimism of these kids.

For example when asked how much they’ll be making in 10 years, the average answer was $90,000. The actual average wage for that age group is just over $31,000.

Almost three-quarters believe they will own their own home within a decade, yet stats show that number is closer to two-in-five.

Media asked the question: what’s wrong with these kids, why are they so out of touch. My answer has been two fold:  first, I am glad that Canadian youth are optimistic and ambitious.  We mustn’t stifle ambition at that age.

I also suggest that they need a reality check.  They need to know that what lies ahead, and plan accordingly and that means managing the financial side of their life.   

The next question the media asked is what about the parents’ role in helping their kids develop financial life skills? The study tells us that the majority of those surveyed learned about money and personal finance from their parents.  Only ten percent said that they took a course at high school. 

Learning from their parents could be a good thing, if their parents understand how to manage their personal finances well. But the reality on this front is that Canadians’ average household debt hit six figures last year, surpassing the Americans!

So what do we take away from this?  Well first, we need financial life skills taught well in our schools so that we give our youth the tools to manage money going forward. They need to learn how to put together a budget and a financial plan, in particular to pay off any debt, particularly student loans, that they acquire along the way.

The Canadian Federation of Students claim that by the time students graduate from post secondary schools, the average student loan debt is closer to $25,000.  A recent federal actuarial report says that national student debt is about to reach a whopping $15 billion by 2013.

In fact, I would suggest that before anyone gets a student loan, they must take a financial life skills course.

The key value that we need to instil in our youth:  the premise that it is better to save your money, and then buy what you can afford, reversing the practice of buying on credit that has become the norm.

In a previous blog post, we talked about our “Be Fraud Aware” website and the campaign website we’ve launched to help people in BC’s Punjabi and Chinese communities protect themselves against scams.

As part of the campaign, we’ve also updated our social media channels, adding new backgrounds to YouTube and Twitter, and a welcome page to Facebook. Let us know what you think about them.

On YouTube, you will find the campaign commercials, investor stories that are based on real investment scams, and a video that helps you identify the warning signs of fraud. We plan to add more videos throughout the year, so stay tuned. We’d also appreciate suggestions for videos that you might find useful.

We’ve also made some other tweaks to InvestRight.

As we mentioned in our last post, there is a new Punjabi landing page and banners that promote the “Be Fraud Aware” campaign.

There is also a new “Report to Us” button. Before the change, it was the “Talk to us” button. We changed it because users told us they felt it looked like a chat function.

You will find this button on the upper right side of the screen. If you click on it, you will be taken directly to an area where you can report a scam online, file a complaint about an advisor or firm, or get the information you need to contact BCSC inquiries.

We have also added a glossary link to the front page above the search box to give people quick access to this tool. Users told us they liked the glossary, but found it hard to find, so we put the link on the homepage.

As you can see from this post, we are open to suggestions for the site. If we feel a suggestion improves the experience of users we’ll certainly consider making the change.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Coquitlam  

InvestRight seminar

November 9

10:00am-12:00pm 

Glen Pine Pavilion, 1200 Glen Pine Court, Coquitlam

Be Fraud Aware!  Learn to protect yourself from Investment fraud, identity theft, & other scams. The BC Securities Commission and the Better Business Bureau of Mainland BC will present this FREE fraud awareness seminar. 

Light refreshments will be served after the presentations.

Register today at the Coquitlam Parks, Recreation & Culture Services -604.927-6940

All welcome! Cost: Free

Ladysmith 

InvestRight seminar

November 16

Private Event

Richmond 

InvestRight seminar- Cantonese

November 17

Private event

Victoria 

InvestRight seminar

November 24

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

A national youth financial literacy survey, released to mark November as Financial Literacy Month, shows that high school graduates are highly optimistic about their financial futures.  On average, students expect to earn over $70,000 in 10 years’ time (more than double the reported income of Canadian post-secondary graduates ten years their age) and almost three quarters expect to purchase a home within ten years, which is a much higher rate than actual home ownership. Over 90% of those surveyed were enrolled in post secondary courses.

“This is the first comprehensive Canadian benchmark study on youth financial life skills.  We believe that the information and analysis in this study will help educators and policy makers develop and deliver financial literacy programs for Canadian youth,” said BCSC Chair, Brenda Leong.

The study surveyed the impact of financial literacy courses on high school graduates. Students who took comprehensive financial literacy courses and had good experiences taking them performed better overall on financial literacy outcomes (attitudes, behaviour and knowledge). The survey also showed that simply having taken a financial literacy course has little impact on these outcomes and having a bad course experience is the same as not having taken a course at all.

“This information points to the importance of how financial life skills are taught in our secondary schools.  The study tells us that the more comprehensive a course is and the better taught, the more likely students will have higher scores on financial attitude, behaviour and knowledge,” said BCSC Chair, Brenda Leong.

The study included a financial literacy test.  BC and Alberta performed higher than the national average.  42% of BC graduates scored an “A” or higher followed by Alberta graduates at 37%, above the national average of 35%.  One explanation for this result is the fact that BC and Alberta both have comprehensive financial life skills courses in their high school curriculum.

On the important matter of student debt, the survey showed that over half of the respondents carry debt, which for nearly 70% includes a student loan.

And while half say they plan to pay it off in five years, the numbers tell a different story. Student debt has reached a record-high of nearly $15 billion, according to 2010-2011 actuarial report released by the federal government.

Concludes Ms. Leong, “The financial realities that we face as Canadians indicate that there is a lot at stake in educating young Canadians to be financially prudent. We need to build on the momentum created by the Taskforce on Financial Literacy and become global leaders in graduating students who are not only well versed in Languages and Mathematics, but in personal financial management as well.”

La Commission des valeurs mobilières de la Colombie-Britannique 

publie son rapport national sur la littératie financière des jeunes 

Selon les résultats d’une enquête nationale sur la littératie financière des jeunes, publiés à l’occasion du Mois de la littératie financière en novembre, les diplômés des écoles secondaires manifestent un grand optimisme quant à leur avenir financier. L’étudiant médian s’attend à gagner 70 000 dollars dans 10 ans, un montant plus de deux fois supérieur au revenu déclaré des diplômés postsecondaires qui ont 10 ans de plus qu’eux. Près des trois quarts de ces étudiants s’attendent à acheter une maison d’ici 10 ans, une proportion beaucoup plus élevée que celle qu’on peut observer dans la réalité. Plus de 90 % des jeunes qui ont pris part à l’enquête étaient inscrits à des cours postsecondaires.

« Le rapport national sur la littératie financière des jeunes [National Report Card on Youth Financial Literacy] est la première étude de référence canadienne consacrée à une évaluation détaillée des aptitudes financières acquises par les jeunes, a déclaré Brenda Leong, présidente de la Commission des valeurs mobilières de la Colombie-Britannique (British Columbia Securities Commission, ou BCSC). Nous croyons que les données et les analyses que renferme cette étude aideront les éducateurs et les décideurs à mettre au point et réaliser des programmes destinés à améliorer la littératie financière des jeunes Canadiens. »

L’enquête visait à mesurer l’impact des cours de littératie financière sur les étudiants détenteurs d’un diplôme d’études secondaires. Ceux qui avaient suivi un cours approfondi d’apprentissage financier et pour qui ce cours s’était avéré une expérience enrichissante manifestaient dans l’ensemble de meilleurs résultats en littératie financière, mesurés d’après les attitudes, les comportements et les connaissances. L’enquête a montré, par contre, que le seul fait d’avoir suivi un cours de littératie financière n’avait guère d’influence sur les résultats et que, dans les cas où l’assistance à un cours d’apprentissage financier s’était avérée une expérience négative, les résultats étaient les mêmes que si l’étudiant n’avait pas assisté au cours.

« Ces résultats illustrent l’importance que revêt la façon dont les connaissances financières sont transmises dans nos écoles secondaires, a ajouté la présidente de la BCSC. L’étude montre que, plus un cours est détaillé et mieux il est enseigné, plus il est probable que les étudiants auront des marques élevées sur les échelles des attitudes, des connaissances et des comportements financiers. »

L’étude comportait également un test des connaissances financières. Les résultats des étudiants de la Colombie-Britannique et de l’Alberta étaient supérieurs à la moyenne nationale de 35 %. En Colombie-Britannique, 42 % des diplômés secondaires se sont mérité la marque A ou A+, tandis qu’en Alberta le chiffre correspondant était de 37 %. Ces résultats tiennent en partie au fait que ces deux provinces offrent des cours approfondis pour l’acquisition d’aptitudes financières.

L’enquête portait également sur une autre question importante, celle de l’endettement des étudiants. Les résultats révèlent que plus de la moitié des répondants sont endettés et que dans près de 70 % des cas, la dette comprend un prêt étudiant. Plus de la moitié des étudiants endettés croient qu’ils pourront rembourser leur prêt d’ici cinq ans, mais les chiffres réels tracent un portrait bien différent. Selon le rapport actuariel publié par le gouvernement fédéral pour 2010-2011, en effet, l’endettement total des étudiants atteint aujourd’hui près de 15 milliards de dollars.

Bref, conclut Brenda Leong, « les réalités financières auxquelles nous sommes confrontés en tant que Canadiens indiquent à quel point il importe d’enseigner aux jeunes Canadiens à se montrer prudents en matière financière. Nous devons faire fond sur la dynamique impulsée par le Groupe de travail sur la littératie financière et devenir des leaders mondiaux produisant des diplômés qui se débrouillent bien non seulement dans les langues et les mathématiques mais aussi dans la gestion des finances personnelles. »

On October 11, we announced our three-year fraud awareness campaign, which starts by focusing on BC’s Chinese and South Asian communities. We are excited about the many different components of our “Be Fraud Aware” campaign, which includes advertising in a variety of media.

In this blog post, I want to introduce you to the updates we’ve made to InvestRight, and the in-language campaign website.

Let’s begin with updates we’ve made to InvestRight.org.

If you are familiar with the website, you will know that it went live in October 2006. Last year, we redesigned the website, adding additional content and sections to help people invest wisely.

In June 2010, we updated our Chinese landing page and added a Chinese version of the InvestRight Guide to Investing.

This month, to supplement our “Be Fraud Aware” campaign, we’ve added a Punjabi version of the Guide to Investing, along with a landing page. Like the Chinese landing page, we added information that will help people make informed investment decisions.

On the Chinese and Punjabi landing pages you will find links to our new “Be Fraud Aware” campaign website. You can also get to this website through a “light box” that will appear when you open InvestRight. If you choose to close the light box, it will not appear again, and you can use the banners to get directly to the campaign website from the homepage.

The campaign website is available in three languages – English, Punjabi & Chinese. On it, you will find posters on the bottom of the page that you can print off and put up in your local church or community centre. There are also videos on the Fraud Watch page that give you a sense of the damage an investment fraud can do to someone’s life.

We’ll talk more about the videos in a future blog post. For now, take a look at our campaign website, and let us know what you think.

"Scam artists follow the news and economic trends, often using the headlines to their advantage," said Bill Rice, Chair of the CSA and Chair and CEO of the Alberta Securities Commission. "They will try to lure investors with the opportunity to protect themselves from economic uncertainty or get in on the 'ground floor' of new technologies that turn out to be false or exaggerated.”

With October being Investor Education Month, the CSA is releasing a list of five common “traps” scam artists use to entice investors across Canada:

1. Illegal sales of misleading exempt market securities. Private placements, or securities sold under an exemption, offer legitimate businesses the opportunity to raise funds by selling shares to a relatively small number of investors as opposed to a public offering made through national securities markets. Unfortunately, scam artists illegally raise money in the exempt market by offering misleading securities that often promise investors guaranteed or unrealistic returns with little or no risk. Furthermore, these individuals are often not registered to give investment advice or make securities transactions.

2. Energy investments. Swindlers continue to attempt to trick investors with the lure of untapped oil and gas reserves or new energy technologies, often using complex technical jargon to confuse the message. 

3. Gold and precious metals. High precious metal prices and the promise of a "tangible" asset that will “never decrease” in value make gold and silver investing seem like a sure thing. Investors should be aware that there are no guarantees, even in legitimate markets.

4. Affinity fraud. Marketing a fraudulent investment scheme to members of a group or organization continues to be a highly successful and profitable practice for fraudsters. Investment decisions should always be made based on careful evaluation of the underlying merits rather than your relationship with the promoter or recommendations from friends and family.

5. High risk or false FOREX schemes:  Trading in foreign currencies requires knowledge and resources far beyond that of most investors. Con artists play on the complexity of the system, using jargon to confuse novice investors into risky trades. In some fraudulent schemes, securities may be sold, but investors’ money is not invested as promised or is simply stolen.

The CSA urges investors to learn the warning signs of investment fraud and independently verify any investment opportunity and the background of the person and company offering the investment. Investors are reminded that while securities regulators cannot provide advice, they can provide background information about those who sell securities or give investment advice, as well as about the products being offered.

Investors should always ensure an adviser and their firm are registered, and can verify registration online through the Canadian Securities Administrators’ National Registration Search. Investors can also visit the CSA’s website, www.securities-administrators.ca to search the Disciplined Persons list, read recent investor alerts, or take the Fraud Awareness Quiz.

The CSA co-ordinates and harmonizes regulation for the Canadian capital markets.

Here are the facts.  Research tells us that 48% of British Columbians have been approached with a possible fraudulent investment in their lifetime, less than 25% report it and just over 10% became victims of fraud.  Half of those were solicited by an existing relationship of trust, such as a family member or work colleague.

The first part of the campaign focuses on the Chinese and South Asian communities because they have very low awareness of the BC Securities Commission, most likely due to language and culture barriers.  We want these communities to recognize the role we play in stopping and disrupting investment fraud from happening, so we are talking to them in their language through the media they use the most.

The campaign consists of television commercials in Mandarin, Cantonese and Punjabi, supplemented with radio and full- and half-page print ads.  InvestRight feature new investor protection information and tools, including two victim videos and the Guide to Investing, in Chinese and Punjabi. 

We will make it possible for people to report suspicious activities in their language because we are seeing an increasing number of Ponzi schemes occurring within ethnic communities.

We did some research with Chinese-speaking British Columbians.  We found that one-third relied on investment information from friends and family, making them a potential target to Ponzi schemes that target groups with tight-knit relationships – we call this affinity fraud.

The first phase of the campaign will run from October 2011 to March 2012. Over the next year, the campaign will be expanded to reach British Columbians across the province.

By delivering this message over a three-year period, we believe that, over time, more people will be able to recognize warning signs of investment fraud and warn others.

It is also our hope that people will call our inquiry line 1-800-373-6393, or report on-line if they have information about a suspicious scheme.

The British Columbia Securities Commission and other participating Canadian securities regulators are seeking comments from retail investors on proposed changes to the regulatory regime that governs junior public companies, or venture companies, in Canada. These companies list their shares on exchanges like the TSX Venture Exchange, and are usually smaller companies with limited resources.

The proposed rule introduces changes to the current regulatory regime for venture companies.  The goal is make these companies’ disclosure more useful and user-friendly for investors, while creating a regime that is more suitable and manageable for venture companies.  More information can be found here and comments can be made on or before October 27, 2011 when the survey closes.

Last year, BCSC staff and other CSA representatives met with investors, industry representatives, from across the country to discuss existing and proposed rules for venture issuers, and obtain feedback.

To help us better understand retail investors’ needs in this market, we are asking Canadians who invest in junior public companies to fill out a short survey that asks what information is important to them. In particular, we are interested in finding out how much retail investors rely on financial reports to make investment decisions.

You will find the survey here: http://www.bcsc.bc.ca/surveys/external/2011/investoren_c.htm 

(For the survey in French, click here)

Your participation in the survey, and the information you provide, will be treated in confidence to the fullest extent permitted by law.  Publication of information from the survey will be aggregated and no identifying information will be released.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

Vernon 

InvestRight seminar

October 7

Private event

Burnaby  

InvestRight seminar

October 14

Private event

Duncan 

InvestRight seminar

October 20

Private event

Kelowna 

InvestRight seminar

October 22

Private event

Kamloops 

InvestRight Seminar

October 25

Private event

Penticton 

InvestRight seminar

October 26

Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator

Email:arutherglen@bcsc.bc.ca

Phone: 604-899-6731 or toll free: 1-800-373-6393

BCSC staff added two Panamanian companies to the Investment Caution List after the country’s national securities commission issued a warning about them.

The Panamanian securities regulator warned that InovaTrade Inc. and InovaTrade Panama Inc. are not licenced to do business in the country’s securities industry. The U.S. Commodity Futures Trading Commission also took legal action against InovaTrade Inc.

The BCSC has learned that InovaTrade Inc. has BC clients. If you are contacted by the company, or have information about it, please contact the BCSC immediately.

Penthouse Capital Financial Services Ltd. was also added to the Investment Caution List in mid-September. The Qualicum Beach-based company was put on the list, after staff determined the company appeared to be engaging in trading and advising activities on its website. It is not registered to trade in, or advise on, securities and exchange contracts in BC.

Finally, BCSC staff added Martin Donald Heppner to the Investment Caution List, after the Ontario Securities Commission (OSC) issued an investor alert to warn investors he could no longer sell securities to investors.

Heppner, the principal of Anchor Securities Limited (ASL), was suspended in late August after the OSC held proceedings on the matter. The OSC also suspended ASL’s registration at the proceedings. Details of the decision are available on the OSC website. [http://www.osc.gov.on.ca/en/SecuritiesLaw_ord_20110830_anchor-heppner.htm]

We urge you to let us know right away if you are contacted by any individual or company that is not registered to trade or advise in BC.

You can do a background and registration search on the InvestRight website if you are unsure about a company or individual’s registration status. Our Inquiries Group can also help you determine registration status. Their contact information is listed under in the “Contact Us” section of the website.

The Investment Industry Regulatory Organization of Canada (IIROC) is now offering an online resource that helps people understand how trading works on stock exchanges and Alternative Trading Systems (ATSs).

The guide is free, and is a good tool for people who want to understand the ins and outs of trading securities (stocks, ETFs, etc.) on equity marketplaces. There are six easy-to-navigate lessons, with each offering a quiz to test your knowledge. The lessons introduce you to:

• Canadian equity marketplaces
• The different types of orders you can place when trading on a marketplace
• How to place the orders and how they are filled
• Your dealer’s duties to you
• Your responsibilities when you are trading on an equity marketplace

It takes about 10 to 15 minutes to complete each lesson, and you can come back to do the modules at your leisure. If you wish, you can also repeat modules until you understand the concepts. There is no requirement to finish one lesson to be able to move on to another.

The concepts in the guide should help all types of investors – new and experienced investors, those who trade with the assistance from an investment advisor, and self-directed investors who trade through an online brokerage.

We are often asked at trade shows or seminars about the types of courses are out there for people who want to learn more about trading and investing. We usually suggest the Canadian Securities Course (CSC), but it requires a time and financial commitment.

For those looking for an overview of how equity markets work, this tool is a nice alternative to get your feet wet. These modules are also good for people, like myself, who passed the CSC and need a refresher.

Mixing this knowledge with other information that is available on other investor education websites, will go a long way in helping you understand how equity markets work.
 

In your community this month 

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month

Vernon
BC Home & Leisure Show
September 9 5:00 pm - 9:00 pm
September 10 10:00 am - 6:00 pm
September 11 10:00 am - 4:00 pm
Vernon Curling Club 3310 39th Avenue
For more information go to http://www.bchomeshows.com/vernon_home_show.html  

All welcome! Cost: Free

Sidney  

InvestRight seminar
September 10
Private event

Vancouver  

InvestRight seminar
September 10
Private event

Salmon Arm  

InvestRight seminar
September 14
Private event

Kelowna  

InvestRight seminar
Sept 15
Private event

Richmond  

InvestRight seminar
September 15
Private event

Lanzville  

InvestRight Seminar
September 22
Private event

Vancouver  

InvestRight Seminar
September 22
Private event

Surrey

Focus on Seniors Forum
September 24
10:00 am- 3:00 pm
Newton Recreation Centre 13730- 72 Ave.
This event is free for all seniors - focusing on the South Asian (Punjabi speaking) audience.
This forum will raise awareness of issues impacting seniors as well as provide valuable information about legal, safety and support resources available to seniors and their caregivers in Surrey.
Lunch will be provided. Lots of great prizes!
Seating is limited, so please register at:

• 604-501-5100 ( 8:30 am- 4:30 pm) Monday- Friday)
• Any City of Surrey ‘s Community or Senior’s Centres
• www.surrey.ca/register 

Roberts Creek
InvestRight Seminar
September 27
Private event

Sechelt  

InvestRight Seminar
September 27
6:00 pm - 7:00 pm
Hosted by Sechelt Rotary
Pebbles Restaurant, Driftwood Inn Trail Ave. Sechelt
Cost: free
Contact: sechelt_rotary@dccnet.com to leave a message call 604 885 0131
Coffee/tea will be served

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

The common offer in this scheme is the purchase of debt obligations (for example, loans, bonds or debentures) guaranteed by the world’s top banks, so-called prime banks, which are offshore. Common terms promoters use to describe these schemes are bank-secured trading programs, high-yield investment programs, standby letters of credit , prime-bank notes, bank-issued debentures or bank guarantees.

How does it work? 

 Scam artists lead investors to believe that they are participating in a secret trading regime with the world's major banks. They often tell investors that this type of investment is usually reserved for rich, powerful individuals or corporations. Dropping the names of the rich and famous is common in these schemes.

Investors might be required to sign non-disclosure agreements that prevent them from disclosing the identity of the parties involved and the terms of the transactions. The promoters may say these agreements are necessary to preserve the exclusive, secret nature of scheme. However, it’s just a technique used in many investment schemes that buy the fraud artist time to move money offshore before the ruse is up.

The promised returns in these schemes are usually very high—annual returns from 20% to 200%, or more. The returns investors receive usually come from other investors’ money. Payments eventually stop because the promoters take the money offshore or squander it all on themselves.

Watch out for one or more of these common characteristics: 

• Assurances the investment is guaranteed by the World Bank, International Monetary Fund (IMF), an international central bank, etc.
• Characterized as a secret, exclusive investment that requires you to sign an agreement not to talk about it
• Vague, complex terminology used to describe how the investment works, and promoters may claim they are too complex for most people to understand
• Promises of high returns that you will receive in payments over time  

Assurances the investment is guaranteed by the World Bank, International Monetary Fund (IMF), an international central bank, etc.

You can read more about common investment schemes on InvestRight.
 

The British Columbia Securities Commission added Imperia Invest IBC to its Investment Caution List after the U.S. Securities and Exchange Commission issued an Investor Alert warning investors about a possible advance fee scheme that specifically targets deaf investors.

In October 2010, the SEC’s Office of Investor Education and Advocacy alerted investors about Imperia Invest IBC, after the agency alleged the company raised more than $7 million, of which $4 million was collected primarily from approximately 6,000 deaf investors in the U.S.

The SEC also said in its complaint Imperia Invest IBC had defrauded more than 14,000 investors worldwide.

The SEC alert warns potential investors, including deaf investors, about the risks of possible “advance fee” schemes related to the companies with names similar to Imperia Invest IBC. In such a scheme, the scam artist asks for money up front for the deal to go through. The bogus fee may be described as many things – a processing fee, or commission, for example. These types of schemes are known to target victims who lost money in a previous scam.

If you live in B.C. and you are aware of anyone promoting what looks to be an advance fee scheme or an investment under the Imperia name, call or e-mail us immediately. Our e-mail is inquiries@bcsc.bc.ca and our toll free number is 1-800-373-6393. Residents of the Lower Mainland can call 604-899-6854.

AMF warns about Forex internet solicitations

Yesterday, the Autorité des marchés financiers warned Quebeckers about unregistered companies that were soliciting investors to speculate on the currency market.

The regulator signalled out two websites forexcanus.com and forex.com, warning that the companies running these websites are not registered in any capacity with the AMF.

We’ve added the information from the AMF watch to our Investment Caution List, under 6149154 Canada Inc.

We urge British Columbia residents to exercise extreme caution when dealing with firms that are not registered to trade or advise in British Columbia. You can find out more about the risks associated with investing in Forex in the Informed Investing section of our website.

Nova Scotia and Ontario investor warnings  

The Nova Scotia Securities Commission is alerting investors who may be considering purchasing securities from Seisma Oil Research, Seisma Energy Research, or related companies. The companies were permanently cease traded in Saskatchewan, are listed as a potential scam the U.S. and Australia. For more information, check out the NSSC Investor Alert.

The Ontario Securities Commission added Thunderlight Entertainment, I.W.F. Inc. (“TWF”), Horizon Explorations Ltd., and Keystone Explorations to its Warning List in August. The OSC posts updates to its warning list on its Twitter feed, @OSC_News.
 

Uncertainty in the financial markets is distressing for us as we look for ways to grow our savings. The media coverage and commentary from multiple sources adds to our anxiety, sometimes causing us to make rash decisions.

One way to take control is to create a financial plan. Setting out your goals, remaining actively involved in the management of your portfolio, and diversifying your investments should help you not make poor investing decisions at the spur of the moment.

Set your financial goals

Before you invest any amount of money, you need to ask yourself some critical questions. These questions will help you create a road map that you can follow (and act upon) in times of crisis or uncertainty.

For example, you may want to save up to buy your first home. To meet this goal, you will need to understand the timeframe you intend to buy, the type of risk you are willing to take with the money, and the kinds of financial products or strategies you can use to get there.

We’ve got a list of questions in our Informed Investing section that you can ask yourself. There is also a worksheet on the webpage that will help you start planning your investments. We also talk about risk and products in this section of the website.

Remain actively involved
For many people, this is the hardest part about investing. It’s very easy to walk into an investment advisor’s office, hand over some money, and walk out thinking that you are taking care of your retirement. The problem with this approach is that the headlines from the past week cause the same person to call up the advisor in a panic to tell them to “sell everything.” As I said off the top, this could be a bad idea that hurts you in the end.

Monitoring a portfolio and understanding investment products does take time and effort. But, it’s worth it. You don’t have to become an expert. You just have to know enough to be able to talk with your registered advisor, set out your goals, and ask questions to make sure they have you on the right path.

You should meet with your advisor regularly, and always check your statements. This will keep you both in sync, and allow you to make informed decisions even when things look dim.

Diversify your investments
You shouldn’t have all of your eggs in one basket. Once you’ve set out your plan and your risk tolerance, you can start to look at investment products and strategies. As you move forward, you will want to ensure that your portfolio remains balanced and in tune with your current goals and financial situation.

Your advisor will help you find the right mix for your needs. However, you still need to ask the right questions about the kinds of investments in your portfolio.

Our InvestRight Guide to Investing provides worksheets with questions to ask. You should never be afraid to ask a question when you don’t understand something. It’s your money.

Final thoughts
In the end, it comes down to having a plan. This will allow you to make calm, informed decisions.

Also, the Globe and Mail’s Rob Carrick wrote an article titled Some do’s and don’t for investors in this market. He outlines some common sense portfolio strategies for retail investors who are worried about market losses.
 

Stark U.S. economic news and the debt worries have caused financial markets to gyrate dramatically over the past week.

On Monday, U.S. stocks posted their worst losses since the 2008 financial crisis, as the markets reacted to the news of the S&P’s historic downgrade of the U.S. credit rating and fears of a second recession began to set in. The downgrade news also affected markets in Canada, with the S&P/TSX sliding dramatically, only to start to recover on Tuesday.

With this kind of volatility comes uncertainty, especially for retail investors who are looking for solid, long-term returns on their investments. These are just the people who scam artists target with schemes that guarantee high returns, with little or no risk.

So, how can you, your friends, or your family members avoid falling victim to an investment fraud?

Don’t panic 

• Fraud artists prey on fear. They know you are worried about your financial future and the safety of your investments. To get you into the scheme, they will offer safety and guarantees, like high monthly interest payments that can’t be achieved legally. Often, these offers turn out to be Ponzi schemes.

Take time to consider an investment  

• Once scam artists get your attention, they will try to get you to buy right away. If you are suspicious, or even unsure of an investment, say “no”. Take the time to consider if the investment and the individual are legit. If you don’t, your money may be lost forever with little, or no hope, of recovery.

Watch out for investments based on fads  

• Right now, gold is trading at record highs. You’ve probably seen the recent surge in ads in newspapers and online offering to buy gold jewellery. Fraud artists watch the markets and trends too. They will try to capitalize on whatever is hot, whether it be gold, a foreign currency, or an industry that is being talked about a lot. They will then create a scam that uses that fad to their advantage.

Learn to spot the warning signs of a scam  

• Even though fraudsters grasp onto fads, securities regulators tend to see the same schemes come and go. Every scam tends to have one or more warning signs, which we call “red flags”. Learn them, they will help you protect your money.

Stick with your plan  

• If you have a financial plan, don’t let a fad or fear get you off track. If you don’t have a plan, now is the time to put one together. This way, you will be able to say no to pressure tactics and offers that sound too good to be true.

For more information on how to spot a scam and to learn about the warning signs of an investment scam, visit the Investor Protection section of our website.
 

In your community this month  

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month

North Vancouver
InvestRight seminar
August 8
Private event

Nanaimo
InvestRight seminar
August 9
Private event

Whistler
InvestRight seminar
August 11
Private event

Parksville
August 15
InvestRight Seminar
Private event

Comox InvestRight seminar
August 17
Private event

Victoria InvestRight seminar
August 17
Private event


We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393
 

• Practical guidance on choosing (or changing) an investment advisor
• Simple steps for monitoring your investments
• Where to go and how to use research when making investment decisions
• Words of caution about investing in private companies

The Guide to Investing comes in PDF format and it is available on our website for download. What’s great about the PDF format, is that you can load it onto iPad through the iBooks application for free. This is also true for the iPhone and iPod touch.

Putting the Guide to Investing on these devices allows you to have it with you for quick reference when you are checking in with your advisor, or doing some casual reading during the summer holidays. I know most people want to relax and not think about money during July and August. However, it’s been awhile since RRSP season, which may have been the last time you were thinking about your investments.

Furthermore, saving the Guide to Investing on a mobile device gives allows you the flexibility to go through it at your leisure. Personally, I find myself using our iPad a lot more around the house for casually surfing the internet and research. I often put apps and documents I want to try out on it, and then go back over time to test them out or read them.

Finally, putting the Guide to Investing onto a mobile device saves paper, which is good for the environment.

To get the Guide to Investing in PDF format on your device, simply,

• Navigate to the “Get the Guide” page on InvestRight
• Link to the PDF, and it will download onto your device
• Touch the screen to make a bar with two buttons appear on the top of the screen
• Click on the button on the top right that says, “Open in iBooks”
• The Guide to Investing will appear on the bookshelf, and remain there

If you are working from a computer, and you want to put the Guide to Investing into iTunes, Apple provides instructions on viewing, syncing, saving, and printing PDFs on their portable devices.

If you want to use the worksheets, you will still have to access the Guide to Investing on your computer, since iBooks does not give you the ability to fill in PDF forms. I came across one app that will give you this functionality. However, I haven’t tested or downloaded it, so I can’t say how well it works. You also have to buy the app, so I will leave it up to you whether or not it’s worth purchasing.

If you do decide to download the Guide to Investing onto your mobile device, let us know what you think by commenting on this post.
 

A purported New York-based investment firm that was advertising its services in online classifieds is one of six recent additions to the British Columbia Securities Commission’s Investment Caution List.

BCSC staff added High Profit Investment Ltd. to the Investment Caution List after finding out the firm solicited BC residents to open trading accounts and have the company trade commodities on their behalf. The solicitations were through online classified ads that recently appeared in the Vancouver region.

On its website, High Profit Investment purports to be a U.S.-based securities and commodities firm, specializing in “online Foreign Exchange (“Forex”) brokerage.”

A Google search of High Profit Investment’s address turned up a pizzeria in the borough of The Bronx in New York City. In our experience, anchovies and investments are not usually sold from the same location, so we made a phone call. It turns out that the pizzeria is no longer located at this address, nor is anyone else. According to the business next door, the location is now an empty storefront.

What’s even more important for investors to know, is the fact High Profit Investment is not registered to do business in the securities industry, in any capacity, in U.S. or Canada. This can be verified by doing a registration search.

The five other recent additions to the Investment Caution List are: Royal Securities Corp., International Youtrade Investments MA Ltd., You Trade Holdings Limited, Offshore Trading Company and Golden Futures Trader.

The Ontario Securities Commission suspended the registration of Royal Securities Corp. and issued an investor alert regarding the firm and its principal, Ningyuan Guo, also known as Mark Guo. The BCSC added the company to the list after receiving this information.

BCSC staff added International Youtrade Investments and You Trade Holdings to the list after Québec’s Autorité des marchés financiers (AMF) cautioned Québec residents about the two firms.

In a news release, the AMF warned about the solicitations the companies were making on their websites, which invited Québec investors to open accounts to invest in derivatives, a complex and volatile investment product. The release went on to say that the companies are not registered as derivatives dealers or advisors with the AMF.

A warning from Panama’s national securities commission regarding Offshore Trading Company prompted BCSC staff to add the company to the list. In its warning, the commission said that Offshore Trading (a.k.a. Offshore Trading Inc.) is not authorized to carry out business as a financial intermediary in or from the Republic of Panama.

Finally, the BCSC added Golden Futures Trader to the list. Staff has information that this company contacted BC residents who lost money after investing with Occidental Capital Partners, a company that was added to the list on March 2, 2011. On its website, Golden Futures Trader falsely claims to be a member of the National Futures Association.

None of these new additions to the Investment Caution List hold registration to trade or advise in British Columbia. We urge you to let us know right away if you are contacted by any individual or company that is not registered to trade or advise in BC.

You can do a background and registration search on the InvestRight website if you are unsure about a company or individual’s registration status. Our Inquiries Group can also help you determine registration status. Their contact information is listed under in the “Contact Us” section of the website.

On July 8, 2011, the British Columbia Securities Commission announced its Criminal Investigations Team arrested Ronald James Conn and his wife, Sze Man “Ella” Conn.

The Conns were arrested in Vancouver on June 28, 2011 by members of the BCSC’s Criminal Investigations Team, with assistance from the Vancouver Police Department.

It is alleged that Ronald Conn and Ella Conn solicited over a million dollars from 21 different investors between July of 2008 and September of 2010. The allegations have not been proven.

 
This is the third arrest for Ronald Conn and the second arrest for Ella Conn related to illegal trading in the securities. The couple have allegedly used various methods to contact investors.

In April 2011, the Saanich Police and the team arrested Ralph Kelly, 46, a Colwood resident, Garrett Campbell, 30, a Colwood resident, and Frank Joseph Pecorelli, 33, a Saanich resident. Multiple charges were recommended, including Fraud Over $5,000.00 and various Securities Act violations. Again, these allegations have not been proven.

Both Ronald Conn and Ralph Kelly received trading bans and fines after being sanctioned by BCSC panels.

In light of these recent arrests, we want to remind people to investigate before investing. Below are a few tools that will help you do your due diligence.

National Disciplined Persons List  

Sanctioned individuals appear on the Canadian Securities Administrators national disciplined persons list, which is available through InvestRight. The list is a valuable resource for investors who are conducting background checks on individuals who are selling investment products.

If you come across a person that is offering an investment product who is on the list, we encourage you to report it to us immediately.

Court Services Online  

BC’s Ministry of the Attorney General provides this searchable database to the public. You can search Court Services Online for documents on civil and criminal matters. Searching an individual’s name will provide you with file numbers, court dates, and court locations. Cases the BCSC is pursuing through Crown counsel normally show up in a search. If you see civil or criminal court cases related to an individual who is selling investment products and you have concerns, you can contact our inquiries group to ask questions.

Investing in Private companies  

If an individual is offering you an investment in a private company (a non-prospectus company), there are rules he needs to follow. Most of the BCSC’s illegal distribution cases relate to the sale of non-registered (private company) securities to unqualified investors.

InvestRight has a section on investing in private companies. We also issued an Investor Watch on the subject, and have a section on private companies in our downloadable Guide to Investing, which is available in Chinese. All of these resources inform you about the rules and risks involved with this type of investment product.
 

You’ve lost money due to a disagreement with your advisor or maybe your advisor’s firm went bankrupt.  Where do you turn?

Last month, the Joint Forum launched a new webpage called Seeking Compensation that sets out an easy-to-use, step-by-step description of where you can turn if you believe that you have lost money because of

• an error or disagreement with, or the possible misconduct of, your representative or financial company. For example, your account was mishandled, or you received inappropriate advice or misleading information.
• your financial institution going bankrupt.The guide provides information about compensation funds that may protect you in these circumstances.

The Joint Forum is a mechanism through which pension, securities, and insurance regulators co-ordinate, harmonize, and streamline the regulation of financial products and services in Canada

Today, we’ve added a link to this Joint Forum webpage to the advisor misconduct page on our website.

In addition to covering investment losses, it also provides information if you have lost money for the reasons above in connection with insurance or banking products.

BCSC adds information about Exchange-Traded Funds 

As we discussed in an Investor Watch from 2009, certain Exchange Traded Funds may not be appropriate for retail investors.

Today, we’ve added an advisory from the North American Securities Administrators Association to the ETF page of our website, which discusses the risks and costs associated with this increasingly popular product.

Over the last few years, ETFs have grown in complexity, and investors may not understand how these investment products work or the potential risks they may face.

We want people to make sure they understand ETFs before they invest and consider whether these investments are right for them. The NASAA advisory , which you will find at the bottom of our ETF page, contains sections explaining

• what an ETF is, and how it compares to a mutual fund
• common traditional ETFs that mirror stock market indexes or industry segments
• non-traditional ETFs, like inverse or leveraged products
• how to determine whether they are suitable for you

The ETF advisory also outlines several risks associated with ETFs, including

• Liquidation. The number of ETFs that are shut down or liquidated, while previously a rare occurrence, is on the rise, up 500 percent in each of the last three years over 2007 levels (which equates to one ETF each week).
• Fees. Leveraged and inverse ETFs must be traded all the time, therefore incurring substantial brokerage fees and commissions. 
• Tax Consequences. Leveraged and inverse ETFs may be less tax efficient due to daily resets that can result in significant short-term capital gains that may not be offset by a loss.

Have a look at all of this information if you are considering investing in ETFs. If you have any questions, send us a comment or contact us through our website.

In your community this month
BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

There are no events in July. 



We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393
 

In Part one, we talked about the big problem that British Columbia had with unscrupulous operators using the loosely regulated US over-the-counter (OTC) markets to fleece investors.

Now, I am going to outline how we are cleaning up this market to protect BC investors and its reputation. Unfortunately, there was no one silver bullet to clean this market up. We initially used enforcement as our main tool, but the cases were often cross-border, hard to prove, and very time consuming.

In 2008, we brought in a new rule to deal with the problem. Companies with a BC connection now have to comply with the same timely and continuous disclosure requirements as those who trade on the TSX Venture Exchange. We also impose restrictions on dealers for their trading activities in the US OTC market. Finally, we report geologists, lawyers and accountants who aid and abet this unscrupulous behaviour, and pursue them if they contravene our securities laws.

Since the rule took effect, about 400 of the 800 OTC companies with a significant BC connection have left the province or gone out of business. Of the remaining 400, over 200 have been cease traded for failure to comply with the rule, leaving a manageable population of less than 200 companies that are monitored by BCSC staff.

Prior to the adoption of the rule, new OTC companies, mainly shell companies, were being created at a rate of two or three a week. Since the rule came into force in September 2008, only about 25 new OTC companies with significant BC connections have been created.

Because we learned that some companies moved their operations to other parts of Canada, we convinced most of our colleagues (with the exception of Ontario) to follow our example.

On June 10, 2011, most Canadian securities regulators put a rule that builds on the BC approach out for comment, following our lead and cracking down on this market segment. This is a positive result to a difficult problem, which we continue to deal with, day in and day out.

Nevertheless, significant challenges with OTC companies in BC remain.

Investors must watch out for inappropriate promotions. But, with the dedication of BCSC staff, and with the cooperation of our Canadian counterparts and US regulatory authorities, we believe that we have made great progress. Protecting investors and the integrity of our markets is our primary responsibility.
 

As part of the Canadian Securities Administrators, the BCSC published proposals today that aim to provide investors with personalized information about the costs and performance of their investments

Patricia discussed this topic from a client perspective in an earlier blog titled: What information must a financial advisor give to their clients. As you can see from that post, these new proposals would shift to a new model that expands the way registered dealers and advisors report to investors.

Under the proposals, investors would receive key information about their account and product-related charges and dealer or advisor compensation. Dealers and advisors would provide this information at relevant times. Additionally, investors would receive reports on the performance of their investments on account statements and annually.

Today, many investors do not receive any information about how their account is performing. If they do, the information is often complex and difficult to understand.

Regulators expect that providing investors with clear and meaningful account performance reporting will assist them in evaluating how well their account is doing and provide them with the opportunity to make more informed decisions about meeting their investment goals and objectives.

During this phase of the project, regulators surveyed 2,000 investors. We also held document-testing sessions to gain better insight into investors’ understanding, and expectations related to fees, performance measurement, and reporting.

BC investors are welcome to provide their feedback on the proposals, which are open for public comment until Sept. 23, 2011. You can find more information in the notice, which is available on the BCSC website.
 

A few years ago, British Columbia had a big problem.  Unscrupulous operators were using the loosely regulated US over-the-counter (OTC) markets to fleece investors.

These markets are not like a regulated stock exchange, such as the Toronto Stock Exchange or the New York Stock Exchange.  Instead, many of these penny stocks trade on little more than hype, unproven rumour and speculation.

From 2000 to 2008, there was, simply put, an explosion of growth of these companies either based in BC or using BC promoters.  The numbers were growing at an alarming rate.  While the stories about these companies were somewhat amusing, the problem was not.  It was beginning to affect the reputation of our capital markets, and BC investors were at risk.

Here are just a few examples of the types of companies that promoters tout as being the “next big thing”.

One company was supposed to be in the wine storage business.  We discovered that all it had rented was 265 square feet of space – smaller than even the standard size storage locker. Another example was the dance studio located in a strip mall in Langley with
“vice-presidents” of dance and Pilates – this tiny business would not normally be a public company.

Also, many of these companies listed bogus shareholders, creating so-called “shell” companies.  In one case, the company listed the coach and some players of a local BC community college basketball as its shareholders.  Once a “shell” company is built, it is sold for hundreds of thousands of dollars to promoters who use it to carry out “pump and dump” schemes that harm investors. 

“Pump and dump” is a type of stock fraud that involves artificially inflating the price a stock, by making false or misleading announcements. This type of promotion leads to an inflated stock price, or the “pump”. Meanwhile, the operators of the scheme dump their overvalued shares into the market.

When the dust settles the price falls, the shares become nearly worthless, and investors lose their money. The promoters, on the other hand, stand to make millions.

This is why investors should be extremely careful when they see the stock of a company trading on the over-the-counter markets hyped through e-mail, on Internet, or in newsletters. There’s a chance it may be a pump and dump, and you could end up losing all of your money. 

In Part Two, we will talk about how we have tried to protect investors and reduce the damage these types of companies doing to BC’s reputation.

Today, we launched a new Chinese Resources page on InvestRight that includes a Chinese-language version of our popular InvestRight Guide to Investing: How to make informed investment decisions.  

We translated the Guide to Investing into Chinese as part of our ongoing efforts to reach out to ethnic communities with our investor education programs. Investors also told us that there is a strong need for more information in various ethnic languages to help them make informed investment decisions.

Because the Chinese community is the largest ethnic group in the Lower Mainland, we felt it made sense to translate the guide and provide it to this community in their own language. We hope it will help even more people avoid unsuitable investments and investment fraud.

The guide provides investors with practical information about investing, like:  

• Investment basics and how to research investment products
• How to research and choose an investment advisor
• The responsibilities and expectations in working with an advisor
• How to check an advisor’s registration status, and how to use the Disciplined Persons List

Additionally, the guide includes a chapter on investing in private companies with information about what people need to know when considering these types of investments. Worksheets support each chapter, making the guide easy for investors to use as a research and planning tool.

The worksheets are available individually for download on the Chinese Resources page. On this page, you will also find other resources, like videos, tips on avoiding investment fraud, and contact information if you need to get in touch with the BCSC.

Check it out, and let us know what you think. We plan to add resources in other languages in the near future, so your feedback will help inform how we present this information.

Over the past couple of weeks, we have discussed some things investors should be aware of regarding the changeover to International Financial Reporting Standards (IFRS) in Canada.

In our previous two posts (Introduction to IFRS for investors and Changes in financial statement terminology), we said that IFRS would apply to most Canadian public companies for financial years beginning on or after January 1, 2011. You will see changes from the conversion to IFRS in first quarter financial reports of these companies.

You may have also seen discussion of expected changes in the management discussion and analysis (MD&A) of these companies over the past few years.

This first IFRS financial report will include an opening IFRS balance sheet as at the date of transition to IFRS. This date of transition, which is the first day of the comparative period, is the starting point for accounting under IFRS.

A company may use IFRS accounting policies that differ from those applied under old Canadian GAAP. Under old Canadian GAAP a company may have treated some expenditures as assets on the balance sheet. Now, under IFRS, they may include them as expenses on their income statement.

In its first IFRS financial report, a company must explain the effect of such changes by including reconciliations of its old Canadian GAAP equity and comprehensive income to its IFRS equity and comprehensive income.

A company’s first IFRS financial report should clearly communicate its significant accounting policies. Most companies will provide a complete list of policies; some may list only the changed policies and state they have not changed other policies as a result of adopting IFRS.

As we said in our last two posts, if you are someone who does not feel you have sufficient information or you do not understand the information in the financial statements, you have options: 

• Ask your advisor to discuss your questions with you
• Ask another trusted professional (your accountant, for example) to discuss your questions with you 
• Submit your question in writing to the company
• Ask your question(s) at the company’s annual general meeting

You can find more information about financial statements and MD&A in the informed investing section of our website.

Finally, the BCSC website has a page dedicated to IFRS. There are a number of resources available through the webpage.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month

Victoria InvestRight seminar
June 14
Private event

Penticton InvestRight seminar
June 14
Private event

Kelowna Seniors Safety Fair
June 16
9:00 am – 12:00 pm
Trinity Baptist Church, 1905 Springfield Road (the corner of Spall & Springfield)
This free, public event focuses on the safety, health and overall well-being of seniors. Through booth displays and interactive demonstrations, seniors will learn about the many programs and services available to them. There will be a feature presentation, refreshments, as well as time for attendees to browse the display booths and ask questions.

Kamloops InvestRight seminar
June 17
Private event

Courtenay June 22
Private Event

Kelowna InvestRight seminar
June 28
Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

The British Columbia Securities Commission’s executive director issued a hearing notice on May 24, 2011 seeking orders against James Dupree, Ian T. Ball, Stephen Armitage, and Peter B. Thompson alleging that they attempted to carry out an advanced fee scheme involving two B.C. shareholders of York-Rio Resources Inc. You can view the notice below.

In 2009 and 2010, the BCSC issued two joint Investor Alerts with the Manitoba Securities Commission warning York-Rio investors about possible recovery room schemes.

If you have any information or questions please contact the BCSC at 604-899-6854,
1-800-373-6393, or e-mail inquiries@bcsc.bc.ca.

BCSC Executive Director’s Bulletin: Securities regulator issues notice of hearing seeking orders against four individuals for advance fee scheme  

Vancouver – The executive director of the British Columbia Securities Commission has issued a notice of hearing alleging that four individuals breached securities laws when they proposed to execute trades for British Columbia residents in exchange for payment as part of an advance fee scheme.

The notice of hearing alleges that James Dupree (Dupree), Ian T. Ball (Ball), Stephen Armitage (Armitage) and Peter B. Thompson (Thompson) attempted to carry out an advanced fee scheme involving two B.C. shareholders of York-Rio Resources Inc. The four men claimed to be representatives of Douglas Charles, a purported offshore investment firm with offices in Switzerland and Panama. Orders are also being sought against Douglas Charles.

The notice of hearing also states that the Douglas Charles website consists almost entirely of text plagiarized from websites of other established financial services firms. For example, text was taken from a B.C.-based investment dealer, an investment dealer owned by a Canadian chartered bank, a wealth management firm based in Manitoba, a Japan-based securities dealer, and two broker dealers based in the U.S.

Furthermore, the Panamanian address given on the website as the head office location for Douglas Charles is actually that of a virtual office services company with which Douglas Charles has had a contract since January 2010.

The notice also alleges that:

• In January of 2011, Dupree contacted a British Columbia shareholder of York-Rio Resources and arranged a phone call between the shareholder and Ball, a Senior Vice President of the Wealth Management and Taxation department of Douglas Charles.
• During the phone call, Ball told the shareholder that he represented an investor who was interested in trading York-Rio shares for shares in Apple, Inc. in order to show a loss in his portfolio.
• Under the terms proposed by Ball, the shareholder would need to send $9,000 to Douglas Charles to make up the difference in share price between the York-Rio shares and the Apple shares.
• On January 17, 2011, Ball sent the shareholder an email that included a document summarizing the transaction described above.
• On February 28, 2011, a representative of Douglas Charles contacted a second British Columbia shareholder of York-Rio by phone and made a similar offer. The second shareholder later received documents via email from Thompson, confirming the offer discussed on the phone.

In addition to the allegations concerning the attempted advance fee scheme, the BCSC is also alleging that Dupree, Ball, Armitage and Thompson engaged in trading securities without being registered in British Columbia.

These allegations have not been proven. Counsel for the executive director will apply to set dates for a hearing into the allegations before a panel of commissioners on June 14, 2011.
 

We are discussing some things investors should be aware of in regards to the changeover to International Financial Reporting Standards (IFRS) in Canada.

If you read our first blog post Introduction to IFRS for investors, you will know that Canadian Generally Accepted Accounting Principles (Canadian GAAP) for public companies transitioned to IFRS beginning January 1, 2011.

IFRS will apply to most Canadian public companies for financial years beginning on or after January 1, 2011. You will see changes from the conversion to IFRS in first quarter financial reports of these companies.

You may have also seen discussion of expected changes in the management discussion and analysis (MD&A) of these companies over the past few years.

In this post, we simply summarize some of the terminology changes you may encounter in financial statements after the IFRS changeover.

As you can see from the examples in the chart below, it is important for you to familiarize yourself with new IFRS terminology because some companies may use it in their financial statements. You should also be aware that some companies may carryover old Canadian GAAP language (like balance sheet) to their IFRS statements.

 
The Canadian Securities Administrators published a more exhaustive list  of terminology and accounting reference changes relating to the continuous disclosure rules of public companies if you need it. We won’t get into them all in this post, but it is worth a read if you want to familiarize yourself with new IFRS terminology.

As we said in our last post, if you are someone who does not feel you have sufficient information or you do not understand the information in the financial statements, you have options:

• Ask your advisor to discuss your questions with you
• Ask another trusted professional (your accountant, for example) to discuss your questions with you
• Submit your question in writing to the company
• Ask your question(s) at the company’s annual general meeting

Finally, we have a section on financial statements in the informed investing section of our website. Most public companies have their financial statements and MD&A available on their website.

We have also updated our InvestRight glossary to help you understand some IFRS terms.
 

Over the next three weeks, we will discuss the changeover to International Financial Reporting Standards (IFRS) in Canada from an investor’s perspective.

These posts are a starting point for investors, to increase awareness that some companies are now reporting in IFRS. Our goal is to point out a few things to be aware of, so that you can investigate further on your own, or ask your advisor questions.

We’ll start in this post by answering a few general questions about IFRS to give you some background on the changeover.

Who issues IFRS standards?
The International Accounting Standards Board (IASB) develops and issues IFRS standards. The board consults with interested individuals and organizations around the world through an ongoing consultation process.

What are IFRS standards?
IFRS standards are global accounting standards that are now required or permitted in over 100 countries, including the European Union, and much of the Pacific Rim. Their purpose is to provide transparent and comparable information in financial statements.

India, Japan and Brazil have announced plans to adopt or converge with IFRS. The SEC has indicated that it will be in a position to make a decision in 2011 about incorporating IFRS into the financial reporting system for US issuers.

Canada’s move from GAAP to IFRS

Canadian Generally Accepted Accounting Principles (Canadian GAAP) for public companies transitioned to IFRS beginning January 1, 2011.

IFRS will apply to most Canadian public companies for financial years beginning on or after January 1, 2011. You will see changes from the conversion to IFRS in first quarter statements of these companies. You may have also seen discussion of expected changes in the MD&A of these companies over the past few years.

The Canadian Securities Administrators amended securities legislation to reflect Canada’s changeover to IFRS. In addition, it published staff notices in the period leading up to the changeover to IFRS that are available on the BCSC website.

What does the changeover mean to investors?
While the principles are very similar between Canadian GAAP and IFRS, there are differences in detail that may affect a company’s recognition, measurement, presentation or disclosure of financial information. IFRS often requires more disclosure of assumptions and estimates than Canadian GAAP.

Investors need to know that some Canadian issuers are now using IFRS, and they should familiarize themselves with new terminology and the potential impact IFRS may have on financial statements.

What if you don’t understand IFRS?

If you do not feel you have sufficient information or you do not understand the information in the financial statements, you have options:

• Ask your advisor to discuss your questions with you
• Ask another trusted professional (your accountant, for example) to discuss your questions with you
• Submit your question in writing to the company
• Ask your question(s) at the company’s annual general meeting

We have a section on financial statements in the Informed Investing section of our website. Most public companies have their financial statements and MD&A available on their website.
 

We continue to have concerns about so-called “wealth enhancement” seminars taking place across the country. Recently, the BC Securities Commission has become aware of seminars that are taking place in Vancouver and Calgary.

 
In Calgary, a company called eConventus is scheduled to conduct a seminar on May 28th and 29th. eConventus is a private BC company that has previously operated seminars at locations throughout the Lower Mainland. The company will hold a seminar at a hotel in Richmond on June 18 and 19.

 
In Vancouver, a company called Peak Potential Training is scheduled to conduct its Millionaire Mind seminar on June 24th to 26th. Peak Potential Training is based in North Vancouver.

 
Anyone considering attending these seminars would be well-advised to think twice and do their research. A good place to start is David Baines' column on seminars in the Vancouver Sun. He talks about “wealth experts” who use financial seminars as a way to get at investors’ hard-earned money. In these seminars, slick salespeople promise great returns, the opportunity to “retire in less than a year with more regular, passive income than you need to live on.”

In addition to eConventus Holdings (BC) Ltd and Peak Potential Training, Baines also talks about DollarMakers, based in Coquitlam, BC. We seem to have more than our share of these types of companies based in BC.

Why are we concerned? Well, we’ve seen cases where investors have lost millions to companies offering financial education seminars.

For example, there was a case in Alberta called Kustom Design Financial Services Inc. This company held seminars supposedly offering financial education. As it turned out, the seminar was merely a cover for the illegal selling of securities to vulnerable investors. Three companies, Kustom Design Financial Services Inc., Kustom Design Group and Hightide Management Inc. raised more than $8 million by luring investors to financial and tax planning seminars where they illegally offered and sold investments to attendees.

In the end, not only was most of that money lost, but the Canada Revenue Agency rejected investors’ ability to claim tax losses on these investments, as was promised to them in the seminars.

“Wealth experts” may be offering a “free” seminar, but their ultimate goal is for it to be anything but free. Even if they don’t offer investments, they often try and get you to pay membership fees or entice you to attend seminars in far-off locations.

The power of these seminars is that they dazzle you with incredible promises. They try to create that magic moment that entices you to write a cheque. It’s a magic moment that can turn into a tragic event. Don’t do it. Don’t even go to the seminar.

Our Investor Watch on wealth enhancement seminars gives some tips on how to protect yourself before handing over any money. We also talk about seminars in the Investor Protection section of our website. 

British Columbia Securities Commission staff recently added FXDD Malta Limited to the Investment Caution List.

Staff recently received information that BC residents have accounts with FXDD Malta Limited (FXDD Malta), a firm offering foreign exchange trading services.

FXDD Malta is not registered in British Columbia to trade in, or advise on, securities and exchange contracts.

We urge BC residents to exercise caution when dealing with firms that are not registered to trade or advise in British Columbia.

The BCSC takes a proactive approach to help protect BC investors by publishing an Investment Caution List. This list provides investors with the names of:

• Unregistered foreign brokerage firms that have solicited BC investors to open trading accounts
• Businesses from other jurisdictions that have solicited BC residents to buy unqualified investments  
• Businesses connected, or purporting to be connected, to BC that have solicited investors in other jurisdictions to purchase unqualified investments

To learn more about foreign exchange trading and the risks associated with it, you can visit the Informed investing section of InvestRight. We’ve set up a Foreign exchange page that answers common questions like:

• What is foreign exchange?
• What risks does it have?
• Can you sell it easily?
• What are the costs?
• What are the expected types of returns? 
    

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month  

Richmond - InvestRight seminar
May 4
Private event

Terrace - InvestRight seminar
May 9
Private event

Williams Lake - InvestRight seminar
May 9
Private event

Kitimat - InvestRight seminar
May 10
Private event

Terrace - InvestRight seminar
May 11
Private event

Smithers - InvestRight seminar
May 11
Private event

Vancouver - InvestRight Ambassadors

May 11 at Library Square McDonalds as part of Team BBB

Prince Rupert - InvestRight seminar
May 12
Private event

Courtenay - InvestRight seminar
May 17
Private event

Richmond - InvestRight seminar
May 19
Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email: arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

On a gorgeous Saturday in central Surrey, the BCSC InvestRight team joined thousands of people celebrating Vaisakhi to help raise awareness about safe and suitable investing.

Invited onto the stage at the RJ1200 radio station setup, I conducted a simple and fun contest with the crowd to give out some InvestRight travel mugs and a gym bag while quizzing the audience about safe and suitable investing. Immediately after, I did a live on-air interview with the radio station about the BCSC's participation in this year's Surrey event and the importance of properly researching investments , as well as how BCSC staff and InvestRight can help investors.

According to some estimates, over 150,000 people attended this year's event and parade. Being on the ground, I can attest to just how crowded and well-attended the event was this year. At times, on 128th Street, it was literally a standstill as I made my way about handing out InvestRight giveaways and chatting with those in attendance sampling the free food and entertainment.

All in all, what a fun and colourful event!

Full of savoury food and bhangra music it is a feast for all your senses. Reportedly, the largest event of its kind outside of India, the Surrey event is certainly the largest street party that I have ever attended!

Here’s a video of InvestRight’s day at the Surrey event. There are also some photos on our Facebook page. Happy Vaisakhi!

This is the final instalment in a five-part series on the exclusive Financial Times interview From Behind Bars, Madoff spins his story – the second interview Bernie Madoff has given since he was sent to jail for life for fraud charges in 2009.

From the interview, we learned that he followed the classic route by using affinity fraud to feed his Ponzi scheme.

Affinity fraud is the term used to describe how investment frauds prey upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly or professional groups.

Madoff acknowledged that he used his Jewish connections, together with a network of important people in Europe to feather his nest. In Europe, he attracted high-profile clients like Liliane Bettencourt, heir to the L’Oréal fortune, that by example attracted lots of European investors. He had close ties with respected Swiss and French banks. In the US, Madoff also mined the wealthy Jewish community for clients.

As his client list grew, so did his reputation. He was appointed Chairman of the NASDAQ index, to the board of the Depository Trust & Clearing Corporation, and was vice-chairman of the National Association of Securities Dealers.

All of this is classic. Being a leader in a particular community helps dispel any worries about legitimacy, and in this case, helped to prevent securities regulators from being suspicious. He managed to avoid any serious investigations by the U.S. Securities and Exchange Commission because he was so big and so credible. He even duped many financiers running hedge funds and other complex investment schemes, including senior partners in Goldman Sachs.

In the “Fraud Among Friends” section of InvestRight, we discuss the affinity fraud warning signs and common targets. 

The Saanich Police Department issued the news release below this afternoon. It is related to the arrest of three men: Ralph Kelly, 46, a Colwood resident; Garrett Campbell, 30, a Colwood resident; Frank Joseph Pecorelli, 33, a Saanich resident. Campbell and Pecorelli have been granted bail, and at this time, Kelly remains in custody.

The BCSC Criminal Investigation Team assisted in the investigation and arrests.

The Saanich Police are seeking further victims or witnesses in relation to this investigation. If you have invested money, or know somebody who has, with any of the suspects and feel you may have been a victim of a fraud, you are encouraged to contact the Saanich Police Financial Crimes Section at 250-475-4321

Investment Frauds Lead to Multiple Arrest File No. 11-4509 

Over the past two days, the Criminal Investigation Team of the B.C. Securities Commission (BCSC) and the Saanich Police Financial Crimes Section have made a series of arrests.  

The investigation started over a year ago when two witnesses arrived at the Saanich Police front counter to seek information. This led to the Saanich Police Financial Crimes investigators starting an investigation. Given it was found to be an investment related fraud, a request for assistance was made to the B.C. Securities Commission.

The original allegations included obtaining money from investors for what was thought to be a legitimate investment. The money then appears to have been converted to personal use. The total value of the frauds is unknown but believed in the hundreds of thousands of dollars.

As a result of the investigation by the BCSC Criminal Investigation Team, warrants for three suspects were obtained. The three suspects arrested by the Saanich Police and BCSC Investigators were Ralph Kelly, 46yrs, a Colwood resident; Garrett Campbell, 30yrs, a Colwood resident; Frank Joseph Pecorelli, 33yrs, a Saanich resident.

Multiple charges have been recommended including Fraud Over $5000.00 and various Securities Act violations.
The Saanich Police are seeking further victims or witnesses in relation to this investigation. If you have invested money, or know somebody who has, with any of the suspects and feel you may have been a victim of a fraud, you are encouraged to contact the Saanich Police Financial Crimes Section at 250-475-4321.

The Saanich Police would like to thank the BCSC Criminal Investigative Team for their assistance in bringing this investigation to a successful conclusion. Learn how to avoid investment fraud at the BCSC investor education website www.investright.org.

This is the fourth instalment in a five-part series on the exclusive Financial Times interview From Behind Bars, Madoff spins his story – the second interview Bernie Madoff has given since he was sent to jail for life for fraud charges in 2009.

Bernie Madoff claims that when he began creating false paper records, his original four clients knew what was going on. It is impossible to know if what he says is true. None of the four individuals has ever been charged.

Three of the four are deceased. The trustee, Irving Picard, has retrieved US $7.2 billion from Picower’s estate and US $220 million from Levy. Chais’ family has not settled and claims no wrongdoing.

Shapiro, who is still alive, settled for US $625 million and denies any wrongdoing. His lawyer counters, saying, “Mr. Madoff is a liar. These latest statements are no more believable than all the other lies that Madoff told his investors and the authorities for decades.”

The article concludes with the heated question of how Madoff was able to keep the scheme running for so long.

Picard says that major banks ignored serious warning signs about the business. He has sued more than a dozen US and European banks, long-time friends, and relatives, seeking over US $100 billion in improper gains and fines.

Picard estimates that the actual losses are about US $19.6 billion. Picard has acknowledged claims from more than 2,400 victims representing about US $6.8 billion.

When the reporters switched topics and asked how he felt about ruining other people’s lives – Madoff says that he took no satisfaction in this…claiming “no malicious action.”

Madoff says that he has spent a lot of time in prison trying to figure out the “why.” Here’s his explanation: “I have spent a lot of time with a psychologist (in prison) which I had never done before in my life, in order to try to figure out how I could have done it.

“There are these mafia people who can kill people all day long, do terrible things, and then go home to their families. I used to wonder how it was that people in wars can shoot people. But the thing is that you could compartmentalize things in your life.”
 

Next: How Madoff used his network to attract more investors 

This is the third instalment in a five-part series on the exclusive Financial Times interview From Behind Bars, Madoff spins his story – the second interview Bernie Madoff has given since he was sent to jail for life for fraud charges in 2009.

With more money rolling in, Bernie Madoff continued to play the market using his so-called “black box” theory – a complicated model that most people wouldn’t begin to understand, but is typical of Wall Street players who like to create winning formulas that impress naïve investors.

It was around 1992, Madoff says, that he began his Ponzi scheme, countering the claim by others that he started as early as 1983. Whether or not it started in the 80’s or 90’s, Madoff was able to run a massive Ponzi scheme for a long time, before it unravelled.

After discussing the timing of when it all began, Madoff makes probably the most astonishing statement of the interview – he says, “it wasn’t about the money.”

But the facts speak for themselves.

He had a very lavish lifestyle – which is a common trait of most fraud artists. A penthouse in New York, holiday homes in Palm Beach and Long Island, and his yacht aptly named Bull. Authorities discovered $75 million in a Gibraltar bank account, along with millions in jewellery and luxury goods.

He claims he did it because of his ego.

All of a sudden, he was no longer an outsider, but part of the ‘club’ with many of the big banks knocking at his door – Deutsche Bank, Credit Suisse. As is always the case in a Ponzi scheme, he had to continually raise more money to provide the steady returns (about 10 %) that was making his reputation on Wall Street and attracting a lot of conservative European investors.

Next: Madoff claims others knew what was going on.
 

This is the second instalment in a five-part series on the exclusive Financial Times interview From Behind Bars, Madoff spins his story – the second interview Bernie Madoff has given since he was sent to jail for life for fraud charges in 2009.

Madoff begins the interview by saying: “I take full responsibility for what I did. I was aware of what I was doing.” He then begins to tell his story to explain, in his view, how it all happened, beginning with the story of his father.

Madoff was born in 1938, the son of Ralph and Sylvia Madoff, a Jewish couple from Queens, New York. His father ran a “moderately successful” sporting goods business which failed when Madoff was a young man. He started out in business with no family money and few academic credentials. He implies that his early years had a profound effect on him.

“You have to understand my history. I started with $500 in capital,” he tells the reporters. “I watched my father go bankrupt. I was very driven. I was always outside the club, the club being the New York Stock Exchange and white shoe firms. They fought me every step of the way.”

He started a small brokerage company in the 1960s called Bernard L. Madoff Investment Securities. Madoff claims that he ran a legitimate business starting in the 1960’s with four prominent clients – Jeffry Picower and Stanley Chais, both investors; Norman Levy, a real estate developer; and Carl Shapiro, a Boston clothing manufacturer. These are the guys that went on to make millions from Madoff’s Ponzi scheme.

In the 70’s and 80’s, taxes were high and many wealthy investors sought creative ways to reduce taxes and grow their money. Madoff says that he successfully invested their money in capital markets – deferring taxes and reinvesting it.

Everything changed when the market crashed in 1987 and his clients started to panic, wanting to liquidate their investments. He says that he wasn’t in a position to get out of the US equity market quickly. He had to find other clients, and he did, with the help of his big four.

Next: Madoff says when the Ponzi scheme began and explains why he did it.
 

In an exclusive interview with the Financial Times, Bernie Madoff tells his story to two journalists, David Gelles and Gillian Tett.

The pair visited Madoff in Butner, North Carolina home to the US prison complex that houses a hospital, a minimum-security unit, and two medium security units where he has been since July 2009.

This is only the second interview he has given since going to jail. The piece, entitled From Behind Bars, Madoff spins his story it is worth examining because it gives us a glimpse of the man and his version of the truth.

Remember he pulled off the largest Ponzi scheme known, taking about $20 billion US in capital from investors, including European nobility, ordinary people, charities, the Jewish community and his own family.

For a quick refresher, here’s a short chronology from the piece on the “rise and fall” of Madoff’s life.

1960 – Bernard Madoff launches Bernard L. Madoff Investment Securities LLC.
1990 – Madoff named chairman of NASDAQ.
December 11, 2008 – Federal agents arrest Madoff after he confesses to his family that he was running a $65 billion Ponzi scheme.
March 12, 2009 – Madoff pleads guilty to 11 counts of fraud, money laundering and other charges.
June 29, 2009 – Madoff sentenced to 150 years in prison.
August 11, 2009 – Frank DiPascali (Madoff lieutenant) pleads guilty to fraud charges. He agrees to cooperate with government.
November 13, 2010 - US marshals raise more than $2 million in an auction of 400 items including jewellery and slippers.
December 11, 2010 – Deadline for bankruptcy trustee to file lawsuits and seek recoveries for victims. Madoff’s son Mark commits suicide on the two-year anniversary of his father’s arrest.

Over the next few days, I am going to highlight Madoff’s comments in the interview to illustrate how he used wealth, power, and influence to deceive regulators, investors, banks, associates, and even, he claims, his own family, over a 16-year period.

Next: Madoff starts the interview by talking about being “an outsider” who was driven to succeed 
 

Recently, I have noticed a lot of discussion around children, money, and allowances.

Dianne Nice and Sonali Verma wrote a couple of interesting articles in the Globe and Mail on the subject, and the Suddenly Frugal Blog discusses kids and money in the context of a recent TD Bank survey.

It could be because April is National Financial Literacy Month in the United States. On the other hand, maybe it is because we just came out of Spring Break where parents were dipping into their wallets a lot to keep their kids busy.

Regardless, it is a popular topic in our household, so I thought I would share how my partner and I introduced allowances into our home.

Our allowance system

My kids are four-and-a-half and two, and they have both have an allowance. Earning the allowance, however, is optional, fun, and (we think) beneficial for everyone.

We started our allowance system with our eldest about a year ago.

At the time, we saw that he was starting to ask for things (treats, toys, etc.) when we were out shopping. He was also developing a keen interest in money, picking up and pocketing every coin he found with great fanfare and depositing it into his piggy bank.

Noticing this behaviour, we thought an allowance, accompanied by a chart that outlined chores and tracked his progress, would be good way for him to understand the value of saving and spending.

Before introducing the allowance chart, we set some simple ground rules:

• Chores would be easy, achievable, and practical
• Doing chores is optional, not required
• Nothing is based on behaviour (ie. going to bed on time)
• Each chore is worth five cents
• Stickers are put on a chart for every completed chore

Flexibility and a new chore 

 
In the end, we settled on four chores for each weekday – putting away dishes (anytime during the day), putting dirty laundry in the hamper (a pair of dirty socks counts), putting away toys before bed (some, not all, is okay), and making the bed (to the best of his ability). Finally, we left it at only the four chore for Saturday and Sunday.

After a month or two, we found bed-making was too hard, so after some discussion with our eldest son, we altered his chart. We ended up splitting putting away dishes into morning and evening dishes. In addition, to our surprise, he asked “getting ready in the morning before daycare” to be added to the list, which we all agreed would be worth 10 cents.

We added the chore to his chart a couple of weeks ago, and he has got a sticker every day so far. The two-year-old still has the original chart.

Since the eldest now knows the difference between five and ten cents, he is super keen on getting ready in the morning. I think he also appreciated the fact he was involved in developing a new chore for himself.

How it’s working  

When we first introduced the chart, we were not sure how it would go. But, after about a year it’s been great for all of us:

• Our eldest is learning about numeracy (he counts his stickers and tries to add), savings, and the value of money.
• Our youngest is getting a sticker here and there, so he is able to participate when his older brother is loading up his piggy bank on payday (Sunday nights).
• My partner and I are benefitting from our son helping with out a few things, making our lives a little easier.
• Our eldest plans his purchases, putting gift money from relatives together with his savings to get things that he wants (he has bought a couple of toy trains to this point, and he’s planning another purchase in the near future).
• When the eldest asks for treats at the grocery story, it is much easier to explain to him that we use our money to buy the groceries we need to stay healthy (we don’t make him buy his own treats, we just try to keep them to a minimum).
• We have interesting discussions about money – how we make choices, saving money, donations, etc.

Final thoughts and interesting links  

I am not sure that there is any magic age or formula to introduce an allowance system.

This is just what works for us. And, if we need to change it to adapt to our youngest son’s needs, we will. I think more important than the systems and charts is to be creative, flexible, fun, and involved when teaching young kids about money and savings.
 

Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month 

 
Langley - InvestRight seminar
April 6
Private event

Campbell River - InvestRight seminar
April 12
Private event

Whistler - InvestRight seminar
April 19
Private event

Kamloops - BC Home & Leisure Show
April 15 5:00 pm - 9:00 pm
April 16 10:00 am - 6:00 pm
April 17 10:00 am - 4:00 pm

McArthur Island Sports Centre, 1665 Island Parkway Drive
For more information go to http://www.bchomeshows.com/kamloops_home_show.html

All welcome! Cost: Free

Duncan - Cowichan valley Spring Home Expo
April 29 5:00 pm - 9:00 pm
April 30 9:30 am – 5:30 pm
May 1 10:00am - 4:00pm

Island Savings Centre, 2687 James Street
For more information go to http://www.homeshowtime.com/events/events_details.asp?evID=111 

 
All Welcome ! Cost: Free

Prince George - 34th Annual Canadian Home Builders Show
April 29 3:00 pm - 9:00 pm
April 30 9:00 am - 9:00 pm
May 1 10:00am - 4:00pm

Prince George Exhibition Grounds, 2187 Ospika Blvd.

Admission prices:

• $8.00 for adults
• $6.00 for seniors, students & persons with disabilities
• Children under 12 free when accompanied by an adult

Advanced Tickets available at RONA, April 1-28th for $5.00
For more information go to: http://www.chbanorthernbc.ca/Default.aspx?PageID=55  

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks.

If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email:arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

When should I use the list?  

• You should use the list as a part of a comprehensive background check when you are choosing an advisor.
• You should also use it to check the background of anyone who is trying to sell you an investment.

Where can you find the list?  

• You can find it linked from InvestRight and the British Columbia Securities Commission’s corporate website.
• It is available on the Canadian Securities Administrators’ (CSA) website in the enforcement section.
• The MFDA, IIROC, and other provincial securities regulators offer direct links from their own websites.

What is on the expanded disciplined persons list?  

• All persons disciplined in BC since 1987, including persons whose sanctions have now expired.
• Individuals who have been subject to sanctions, no matter how serious, imposed by any provincial securities regulator, IIROC or the MFDA.
• Names of persons IIROC and the MFDA have disciplined, dating back to 2004.
• Links to supporting records and orders.

What is the purpose of the list?
The expanded Disciplined Persons List complements disciplinary databases made available by Canada’s various regulators, which detail cases involving firms and ongoing hearings.
 

To find out more on how to do a background check go to the “Choose an advisor” section or the “Investigate before you invest” section of InvestRight.

With Fraud Prevention Month winding down, I thought it would be a good time to point people to a special information feature in the Globe and Mail’s Special Reports section.

The Canadian Securities Administrators (CSA) and other organizations participated in a three-page supplement that ran at the end of the Globe’s business section on March 22, 2011. We posted it to InvestRight in our “Tools for investors” section, and it will remain on the Globe’s website for 90 days.

The feature focuses on how different kinds of scams are perpetrated online. The articles in the feature warn that this problem is only going to grow as more people use digital devices to pay bills, buy things, and invest.

In April 2010, a BCSC panel banned an international website that was soliciting investors in B.C. with promises of returns of as much as 1.9 per cent a day and 9 per cent weekly - that translates into nearly 500 per cent in a year.

An article in the Globe feature references the case – Genius Funds – and you can find out more about it on a special page we set up on InvestRight in our “Investor Communications” section.

To sum it up briefly, Genius Funds solicited two B.C. investors: one wired $25,000 to the company; the other did not. BCSC staff received a tip about this transaction from a financial institution in February 2010, and a temporary order was issued against Genius Funds.

In April 2010, a BCSC panel permanently banned Genius Funds for illegally selling securities through its website and offering investors a rate of return so high it could not be earned through legal means.

Genius Funds did not attend the hearing. It is now on the BCSC’s Investment Caution list.

At the time, we spent a lot time blogging about Genius Funds and High-Yield Investment Programs (HYIPs). Take some time to read these posts, and spend some time looking through our Investor Protection section.

Finally, remember, if you think you know of or suspect a scam, report it through the “Talk to Us” button the home page or by calling us toll free at 1-800-373-6393.

Investor questions  

When we participate in events or give seminars, there are always great questions from the public, who are curious about who we are and what we do. Below are three answers to questions that we thought would be useful to share with our online audience.

How do I determine safe vs. less risky investments from others?

It is a good idea to understand your risk profile, and your short- and long-term goals before determining what kinds of investment products are suitable for your portfolio. Our website assesses products from a risk perspective. You can check out the About investments section, which talks about the risks, returns, fees associated with specific investment products, and whether you can sell them easily.

Where do mutual funds sit on the "risk-scale”?  

Each mutual fund has a different level of risk. The fund manager’s investment strategy, skill, and the products and companies the fund invests in are all factors that can determine the fund’s risk. The chart on our Mutual funds page shows the types of risk you can expect from different funds.

Who do I talk to if I want a second opinion on what my advisor recommends?  

As a securities regulator, we cannot give advice about investment products.

Nevertheless, we do provide a free guide that can help you manage the relationship you have with your advisor. It provides you with questions that you can ask your advisor questions about investments and investment strategies. If that is not enough, you can always seek the opinion of another advisor, keeping in mind that you should check their registration status and background beforehand.

To find out more about choosing an advisor and managing your relationship with that person, visit the Work with an advisor section of InvestRight.

For more answers to questions that people often ask us, go to our Questions & Answers section on our website. We also invite you to send us your questions through our Talk to Us button on the InvestRight homepage, or by commenting on this post.

 

• See something you like in a store? Start a savings goal in My Make it Count.
• Bought a snack? Record your transaction in My Make it Count.
• Worried you are spending too much on clothes? Review your recent spending habits in My Make it Count.

About Make it Count Make it Count information and guides for parents and instructors are available at mymakeitcount.ca and provide tips, activities and plenty of opportunities to engage youth in talking about effective money management. Order or download your free copy at makeitcountonline.ca.

The Canadian Foundation for Advancement of Investor Rights (FAIR) released a report that was covered in the Globe and Mail by Janet McFarland.

The title of the report is “A Decade of Financial Scandals.” It’s an interesting read and it raises many good questions. The basis for the report is an analysis of fifteen securities or investment related scandals that occurred in Canada over the past ten years.

Over that time, Canadians suffered significant financial losses and this report examines the causes – everything from Ponzi schemes, now made famous by the Bernie Madoff case in the US and the Earl Jones case in Quebec; to the misappropriation of assets and the mismanagement of books and records. Of the 15 cases examined, three were from BC: Ian Thow, Manna and Vantage.

FAIR makes four recommendations in the areas of fraud prevention, earlier detection of fraud, prosecution and compensation. BCSC is working hard in all of the areas outlined by FAIR and agrees that more needs to be done to protect investors.

After you have read FAIR’s report, look at the just released 2010 Enforcement Report by the Canadian Securities Administrators. It outlines how Canadian securities regulators are working to detect and disrupt misconduct in Canada’s capital markets. It shows that securities regulators are working very hard to bring more cases before the courts that result in jail sentences.

The report also shows that 48% of the total cases concluded in 2010 were under the category of illegal distributions that often involve Ponzi schemes, affinity fraud and boiler room operations. This points to FAIR’s first recommendation – the need for a well funded national campaign to educate consumers on how to avoid financial fraud.

Both reports are timely. March is Fraud Prevention Month.

If you’re a young Canadian between 15-to 21-years-old, be prepared to get fit – financially fit, that is – and have fun doing it while challenging and competing against friends and other youth across the country. 

The Canadian Securities Administrators (CSA) ‘Financial Fitness Challenge’, an online contest that uses videos, Facebook and Twitter tips to help youth increase their financial literacy begins today. Young Canadians will have the chance to win an Apple® iPad or a grand prize of $2,000 for participating in the contest. 

The Financial Fitness Challenge runs from February 15 to April 15, 2011 and uses interactive tools and scenarios to raise awareness of important financial concepts such as balancing needs versus wants, budgeting, saving and investing. This year, there are four new entertaining and informative videos featuring “Buck,” an animated host who tells it like it is when it comes to budgeting, credit cards, investing and online or investment fraud.  

The bilingual contest is open to Canadians ages 15 to 21 and offers them the opportunity to invite friends to join the Challenge, and to compete and engage with contest participants at a local and national level. Close to 60,000 youth actively participated in the challenge over the past four years.  

Teachers can download classroom materials including lesson plans from the Teacher and Parent Resource Centre online at the contest website. 

BC teachers should also check out the BC Securities Commission’s award-winning resource, The City: Financial Life Skills for Planning 10.  

I met Garth Rustand several years ago before he started Investors Aid Co-Operative of Canada. He had worked in the financial services industry for over 10 years so he understood how the industry worked.

At the time I met him, he talked about consumers having a hard time understanding the complexities of investing in the market. He was particularly concerned that the vast majority of people investing in mutual funds do not understand that after subtracting the management fees, the average return tends to be much lower than expected.

A recent article in the Vancouver Sun talks about Rustand’s goal with his organization to “empower Canadians who want to cut costs and take greater control of their investments.” Clearly, some Canadians agree because the Co-operative already has about 600 members and partners like the Certified General Accountants of BC and Alberta.

We give the same message to investors. It is important to do your homework, ask questions, do research, so that you can be part of the decision. It is your money after all.

Rustand points to a couple of investing traps.

Real estate based securities. While Canadians are used to investing in their own homes, they need to be wary about investing too heavily in securities, based on real estate. Remember Eron Mortgage. Take a look at this information about investing in real estate.

Leverage. Again, Canadians are used to borrowing money to buy a home, but they should be very careful using borrowed money to invest in mutual funds or stocks. There is always risk involved and if they lose money on the investment, it will be much harder to pay off the loan.  

Anne Rutherglen, Program Manager- Investor Education - Outreach
Email: arutherglen@bcsc.bc.ca  
Phone: 604-899-6731 or toll free: 1-800-373-6393 


 

RRSP season is a great time to check in with your registered investment advisor and decide how to allocate your contribution for 2010. But don’t let yourself feel pressured by them, or by the RRSP advertising that’s in full swing this month.
 

As long as you make your contribution by the March 1 deadline, the actual investments you choose are up to you. Not ready to decide? You can also leave your contribution in cash, in the form of a deposit or cash balance, where you bank or at a registered securities firm. Then, when you’re ready, you can choose the type of investment that fits your investment strategy.
 

It’s as easy to feel pressured to do the same old thing as it can be to look into something new. So, whether this is your year to step into new investing territory or to revisit your usual assumptions, start with InvestRight’s Informed investing section.
 

Know yourself: Could your risk profile have changed since last year? Find out by taking the risk test.
 

Know your investments: It’s much easier than you think to follow the market and monitor your portfolio. Here's how to get started.
 

Work with an advisor: Your advisor is registered, right? Make sure they are, then find out how to make the most of your advisor-client relationship … in RRSP and every season.
 

About investments: InvestRight’s unbiased approach to investment information takes off the rose-coloured glasses and looks at the risks, returns, and fees first.
 

Where we are this month

North Vancouver InvestRight seminar
January 10, 2011 
Private event 

Nanaimo InvestRight luncheon seminar
January 12, 2011
11:15 am – 1:00 pm
Grand Hotel 4898 Rutherford Road
Hosted by Nanaimo Chamber of Commerce
Cost for lunch: Members- $30.00; Non-members- $40.00 (HST not included)
To RSVP call 250-756-1191 or email info@nanaimochamber.bc.ca 

Duncan InvestRight seminar
January 13, 2011
Private event 

Burnaby InvestRight seminar
January 19, 2011
Private event 

Vancouver Mineral Exploration Roundup
January 24-25, 2011 
10:00 am - 5:00 pm
Westin Bayshore -1601 Bayshore Drive, Vancouver
Hosted by Association for Mineral Exploration BC
Come visit the BC Securities Commission booth

On-line registration: http://www.amebc.ca/roundup/overview-2011/roundupregistration.aspx
For more information visit: http://www.amebc.ca/roundup/overview-2011/aboutroundup.aspx  

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Program Manager - Investor Education - Outreach
Email: arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

The Ontario Securities Commission has issued an investor warning about a possible advance fee scheme. In this case, investors in a number of real, but poorly-performing companies were offered premium prices for their shares provided they first sent a fee to cover the transaction.

Advance-fee schemes aim to gather money from investors by promising to buy their illiquid securities for much more than they are currently worth. Once the fee is paid, the investors never receive any money for the securities they agreed to sell.

In this case, investors in Canada, the US, and UK were contacted by callers claiming to work for the OSC, or the US Securities and Exchange Commission, and persuaded to pay up-front fees to bank accounts in Toronto and Hong Kong.

To put a stop to this activity, the OSC issued a temporary cease trade order against Michael Chomica, Peter Kuti, Jan Chomica and Lorne Banks, and companies named Global Consulting and Financial Services, Crown Capital Management Corporation, Canadian Private Audit Service, and Executive Asset Management. A hearing will be held on November 17, 2010.

The OSC warns investors not to send money to these people and companies, or the following: Belmont Group Limited, Chelsea International Consultants, Eurasia Mergers and Acquisitions Registration Authority, Global Capital Group, Global Asset Management, Highgate Consultancy Services, Jermar Inc., Jermar Productions and Macao Management.

For further information, contact the OSC Contact Centre at 1-877-785-1555.

Our revamped website InvestRight.org has a new section on high-risk investments, which includes hedge funds. For good reason. Just say the words, hedge fund, and people’s eyes light up with visions of spectacular returns (never mind spectacular risks).

It is generally believed that hedge funds are for sophisticated, wealthy investors. The minimum investment for these funds used to be $1 million or more. Today, investors with as little as $100,000 participate in pooling programs, or even as low as $10,000 for funds that are structured more like mutual funds.

Remember hedge funds are not subject to specific regulation and are usually highly speculative in nature. Because investors tend to believe that hedge funds promise fabulous returns, they often don’t investigate before they invest. Just because a major accounting or law firm is involved in a hedge fund does not necessarily guarantee everything is on the up and up.

Now there is some evidence to suggest that hedge funds might be another vehicle for scam artists to exploit. A recent article in the National Post describes a hedge fund that is being investigated by the Ontario Securities Commission. The alleged fraud scheme is based on a Luxembourg-based (hint) water business that has the rights to tap glaciers in Iceland. More than 200 Canadians invested about $30 million in the fund.

The OSC alleges that investment funds units were sold at falsely inflated values, and the moneys generated by the funds were misappropriated. A prominent Toronto business executive was among the Canadian investors who invested in this hedge fund company.

Just alike any other investment, even if you consider yourself a sophisticated investor, do your research. Look at how the hedge fund is run, who is involved, and anything (like marketing glacier water) that might ring alarm bells.

We are hosting a joint conference with the Alberta Securities Commission to talk about the vital role of small and medium size enterprises (SMEs) to BC and Alberta’s economy.

Iain Black, BC Minister of Small Business, Technology and Economic Development spoke at the Vancouver Board of Trade this week. He told us that a whopping 98% of all businesses in BC are in the small business category.

At the conference, we will be releasing new information about the amount of money raised in BC’s and Alberta’s private market. We will examine the importance for start-up companies to access capital in the current economic environment. We will look at what kinds of information investors need in order to consider investing in a small to medium sized company.

We are also going to examine our highly successful venture capital markets and discuss the concept of proportionate regulation – less burdensome but more efficient.

The conference features the following speakers and panellists:

• Jock Finlayson, Executive Vice president, Policy, Business Council of BC
• John McCoach, President, TSX Venture Exchange
• Martin Eady, Director Corporate Finance, BC Securities Commission
• Darrin Hopkins, Vice President, Macquarie Private Wealth Inc.
• Hans Knapp, Partner and General Counsel, Yaletown Venture Partners
• Andrew Rae, President and CEO, iCO Therapeutics Inc.
• Bill Rice, Chair Alberta Securities Commission
• John Wright, President and CEO, Petrobank Energy and Resources Ltd.

Our moderator is Dr. Cristie Ford, Assistant Professor, UBC Faculty of Law.

Capital Ideas, Tuesday, October 26, Four Seasons Hotel, Vancouver. Register today.

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing.

Where we are this month
Prince George
InvestRight seminar
Oct 19, 2010
6:00 pm - 8:00pm
Coast Inn of the North - 770 Brunswick Street
Hosted by Prince George Chamber of Commerce
Free
Contact (250) 562-2454 for reservations.

Prince George
October 19 & 20
Private events

Quesnel
October 21
Private event

We present to various service clubs such as Rotary, Probus, Newcomers, women’s groups, senior’s organizations, and other networks. If your group of 20 or more would like to have the BCSC come and present InvestRight, please contact:

Anne Rutherglen, Communications Coordinator
Email: arutherglen@bcsc.bc.ca
Phone: 604-899-6731 or toll free: 1-800-373-6393

Some people may need help in hiring a financial advisor. It is important that it is a good fit and that you get the kind of support and service that you need.

The Globe & Mail’s investor section launched Financial Planning Week with a conversation with certified financial planner Debbie Ammeter. Check it out. She is giving sage advice that may assist you in your search.

We also provide help in choosing an advisor. Don’t hire someone who is unwilling to spend time answering questions you raise. Watch out for the advisor that uses a lot of industry jargon that you don’t understand. Make sure you feel comfortable with this person. It’s your money, and you need to have a relationship based on respect and mutual understanding of the goals of your portfolio.

Look at our Guide to Investing, especially the interactive work sheets that guide you through the process. It helps you do the research, suggests the kinds of questions to ask and how to manage your portfolio going forward.

The new website has a lot of information to help you become an informed investor. Check it out. Give us feedback about what works and doesn’t work for you on InvestRight.org.

Well, this is it! Today, we finally take the covers off our redesigned website – InvestRight.org.

All summer we have been working behind the scenes to revamp our website to improve how we can help investors protect themselves from scams, avoid unsuitable investments and make more informed investment decisions.

As our director of communications and education points out: "The plethora of Ponzi schemes and investment fraud over the past couple of years has made the public painfully aware of how easy it is to get caught up in a bad investment."

As the province’s securities regulator, our job is to help people better protect themselves against investment scams. That said, we also want people to look to us when they need help with their investments, such as when they want to know what questions they should be asking about their portfolios or what they should consider when choosing an investment advisor.

We hope the revamped website allows people to do all of this better through a fresh, smart design with better navigation and easier access to all the content that you have come to expect in our former web offering. In addition, we have added new content about high-risk investment products and investing in the private companies – topics that we know people have questions about when it comes to investing.

So please take a tour through and let us know what you think about our new InvestRight.org website.

The report confirms what we have been blogging about extensively.  The increased use of social networking sites to recruit victims and promoters combined with the economic downturn has produced more Ponzi and fraudulent investment schemes than ever. 

According to the report, Canadian losses amount to $320 million to date. This reflects the amount of losses that are reported. We know that many are not reported, so the amount of money Canadians have lost is probably much higher.

The report uses the statistics gathered in a national study undertaken by the Canadian Securities Administrator’s 2009 Investor Index that provides year-over-year information about Canadians’ knowledge about investments and investment fraud.

In the trends section, the writers note, “the size and complexity of these schemes help conceal criminal activity, generate ample profits and facilitate tax evasion and money laundering.” They go on to suggest that these types of operations require a minimum level of organization, (just like we have seen with high yield investment programs HYIPs), and are able to involve lots of people through the use of social media.

Clearly, the message to consumers is written in bold here – fraudsters are using sites like MySpace, Facebook, Craigslist, and YouTube to provide professional-looking, but false, information to part people from their money. These sites also allow the perpetrators to trade lists of potential victims and recruit intermediaries who promote these schemes for a commission.

Be sceptical, ask questions. Don’t fall for schemes that are promoted through social media sites.  When in doubt report any suspicious activity to your securities regulator.

The US Financial Industry Regulatory Authority’s (FINRA) Investor Education Foundation has produced an hour-long documentary called Tricks of the Trade: Outsmarting Investment Fraud, based on four years of research.

You get to hear fraud artists describe how they con people out of their money. The film is very instructive. It is well worth ordering. Limited quantities of the documentary are available on DVD at no cost.

You learn how to identify the many different persuasion tactics fraudsters use and how effective the tactics can be on people who haven’t learned to protect themselves. The documentary begins by identifying the most vulnerable audience – overconfident, financially literate men 55 to 65, who engage in risky behaviour. 

What is particularly interesting about this documentary is that it is based on what is learned from listening to hundreds of undercover tapes of con men pitching victims.

One of the most riveting moments in the film is the simulation of a telemarketer phoning a potential investor from a boiler room. If you want to learn how to develop your own “refusal” script, go on line, and look at FINRA’s website and order this documentary.

If you happen to fit the criteria of the most vulnerable target, you watch it, especially if you think it would never happen to you.

He went on to explain that of the 14.6 million officially unemployed, nearly 45 percent have been looking for a new job for six months or longer. There are 5.9 million people who have stopped looking for a job but still want to work and 8.5 million Americans who are working part time but would like to work full time. That is 30 million Americans who desperately need to find work. The consequences of such high unemployment are huge. 

In Canada, the situation is not as dire but still worth noting. Stats Canada numbers released early August show that the unemployment rate was 8.0%. The percentage of unemployed Canadians who have been looking for work for more than six months is 22.5%.   Worrisome too was the news that the unemployment rose for women 55 and over (6.5%, the highest in six years) and men 55 and over (7.1%).

Now think like a con artist.  Wow!  What an opportunity for people to promote schemes that promise significant returns with little or no risk to people who are desperately in need of money. 

Watch out for on-line Ponzi schemes called high yield investment programs.  Watch out for people who use personal relationships in religious communities or any other tightly knit community, to promote very sketchy investments.

Now is the time to get the message out.  Anyone who promises you unusually high returns and says in the same breath, low or no risk should be suspect and reported to us.

To read previous posts on this and other topics, click on Let’s talk about investing.

In BC, more than 60,000 students will apply for student loans this year while BC student unemployment reaches 21%. The cost to the province of unpaid student loans is growing at 30% a year. Seems like a crisis worth solving, doesn’t it?

A group of BC-based MBA students are trying to address this problem. Their company, Sustainable Debt Solutions Inc., is developing a pilot program that teaches students how to manage their money – everything from knowing how to live within your means, tracking your income and expenses, and how to save.  The program will teach students how to develop a plan to pay back the loans within a reasonable amount of time. The goal is to increase repayment rates of student loans overall.

Why would they be talking to us? We both agreed that students that are applying for students loans could benefit from financial literacy training. BCSC has developed a comprehensive program called The City, to teach financial life skills to BC high school students.  University students could benefit from taking this course, in particular, the credit and debt module, in order to help them figure out the best way to anage their way through post secondary education.

This fall, BCSC will launch its revised and updated version of The City. It believes that the resource should be used not only to educate high schools students, but could be used in continuing education courses in community colleges and for helping students manage their student loan debt.

To read previous posts on this and other topics, click on Let’s talk about investing.

Earlier this year, our enforcement division received an anonymous tip that Orion Advisory Services and IntelliSource Markets B.V. (aka IS Markets) were targeting Canadian and UK investors, eight of whom lived in BC. 

We were able to contact five of the eight BC residents. All said they had been cold called to invest in Orion. Three opened trading accounts with IS Markets, sending thousands to a Dutch bank for the purpose of trading gold options. All three lost their money and, as our investigators unraveled the story, it became clear that others had as well.

Orion claimed to be a securities trading business specializing in options on precious metals, oil, and foreign currency, with offices in Cancun, Mexico, Barcelona, Spain, and Panama City. Orion presented IS Markets as a financial institution in Amsterdam that held accounts for Orion investors. Neither company was registered to sell securities in BC.

People often hesitate to report that they have been defrauded, or that someone is trying to pressure them into an investment. Thanks to the tips we received in this case, our investigators gathered enough information to put Orion and IS Markets on the BCSC Investment Caution List and bring their activities to a BCSC hearing. Last week, the hearing panel ordered both companies to cease trading securities and exchange contracts and banned them from investor relations activities in our province. 

As I wrote in a post about boiler rooms last year, if you’ve attended a fund-raising lunch, or walked on a fairground midway, then you know that once you start listening to somebody’s pitch, your hand is already on your wallet.

The first step to protecting yourself from an operation like Orion is to hang up the phone. If you don’t hang up, step two is to ask questions: if you don’t get answers, hang up. Step three: report.

You may think that nothing will come of your report, or there’s nothing to gain if you, or someone you know, has already lost money. But that’s far from the truth. As the anonymous tip about Orion and IS Markets shows, these operations can be stopped. And you can help. 

When my parents were getting older, I used to worry about their health. How long would they remain independent, able to look after themselves? Would my mother’s smoking finally take a toll? How long would Dad be able to play golf, his favourite past time?

What I did not worry about, and should have, was the possibility that someone could con them out of their life’s savings. I was never able to work up my nerve and even begin a discussion about money.  (Many of their generation did not think money should be a topic of discussion. My parents belonged to that category.) 

I would now, knowing what I know today. June 15 is World Elder Abuse Awareness Day – a day to recognize that seniors are targets for all sorts of things, including financial fraud. Having a conversation about prevention and protection from investment fraud is a good idea.  Maybe even more than a just a good idea.

I should have told my parents that they were targets for scam artists. I should have explained that any request that they received to send money to anyone for anything should be looked at carefully. 

Because fraudsters dream up all kinds of clever ways to extract money from seniors – from lottery scams to illegitimate investments promising unrealistic returns. Seniors need to understand that they need to look at every sales pitch sceptically. They should ask for a second opinion before parting with their money.

If my parents were alive today, I would try to make them comfortable talking about money with me. So comfortable that they might even have asked for advice before writing the cheque.

I never did have that conversation.

To read previous posts on this and other topics, click on Let’s talk about investing.

BCSC is stepping up its campaign to stop affinity fraud in the BC church community.

Valley Chaplain Consultants (nicknamed God’s Fraud Squad) is organizing presentations in churches across BC entitled “Telling the Truth…Exposing Affinity Fraud.”
The first two are in the Fraser Valley:

• Thursday, June 10, St Luke’s Catholic Church, 20285 Dewdney Trunk Road, Maple Ridge 3:00 and 7:00 pm
• Wednesday, June 16, Trinity Lutheran Church, 3845 Gladwin Road, Abbotsford 10:30 am

We know from research and personal experience that investment fraud exploits relationships of trust and is devastating to families, friends and communities.  We want people to begin to protect themselves, particularly in churches, where trust is an important component of spiritual well being.

Don’t hesitate to contact us if you wish to have a presentation in your church or if you have any concerns that you wish to pass along to us.  1-800-373-6393 or email us at inquiries@bcsc.bc.ca.

To read previous posts on this and other topics, click on Let’s talk about investing.

I have spent the last couple of months writing about online internet scams called high yield investment programs (HYIPs) which are a type of Ponzi. These schemes are promoted online through social media – Facebook, YouTube, Twitter, chat rooms, and the myriad of HYIP websites that list and analyze these programs.

That’s one way of enticing people to send money through bank wires and payment processors (PayAlert, Liberty Reserve, Perfect Money). Take a look at the Globe and Mail’s HYIP Highlights: Buyer Beware.

But there are many other ways that these folks can lure you into an illegitimate scheme.  One of the worst is through friends, family and acquaintances.  Many of these illegitimate schemes either become successful by using middle people, who know that the investment scheme is not legitimate, or don’t know.  But what they do know, in return for convincing others to invest, is that they receive a commission, an incentive to get more people to send money to whatever scheme is being promoted.

We have been involved in many cases where the fraudsters used promoters or middle people to bring in more people.  A key component for one called Manna Ponzi scheme was the use of existing investors to bring in new investors.  They were called 'affiliates' or 'consultants'. They were paid one-time bonuses of between 10 and 15% of the amount invested by the new investor. They were also paid a monthly percentage of the amount invested by the new investors.

In the case of HYIPs, most offered what they called “referral” fees of 3, 5 or even 10%.  One offered a whopping 20% referral fee.

We at the BC Securities Commission are working hard to get the message across that religious communities are big targets for this type of fraud. Churches, mosques, temples - wherever people gather to worship and socialize - are ideal places for these middle people to find investors to help them earn a commission.

We have a program called God’s Fraud Squad that has been in existence for seven years.  This year, we are expanding it to try to prevent and disrupt this type of activity from happening across the Province. We need all the help we can get.  If you belong to a religious group and want to learn more about how to avoid this type of activity happening, contact BCSC Inquiries. 

To read previous posts on this and other topics, click on Let’s talk about investing.

The St Louis Dispatch Post reported on Saturday that over 40,000 investors in more than 120 countries lost $70 million in a Ponzi scheme. It appears that this is another one of those high yield investment programs (HYIPs) that Wikipedia calls a “type of Ponzi scheme.”

The Canadian man who is alleged to be behind the scheme, Nicholas A. Smirnow, faces 10 US federal felony charges, including mail and wire fraud, securities fraud and money laundering. He had many aliases including Nicolay Smirnow, Alexander Judizcev, Nicholas Kachura and Jeff  Prozorowiczm.

According to the article, this huge scheme began in Ontario in 2007, using a website based in the Netherlands and a company incorporated in the Turks and Caicos Islands of the Caribbean. The man had history of convictions, some dating back to 1979 including burglary, drug trafficking and possessing stolen property in Canada.

Just like all of the other HYIPs that I have been writing about, this one offered returns of 500 to 700 percent and commissions of about 10 percent to lure others into the scam.

As all good con artists know, you need to allay people’s concerns by claiming not to be what in fact you really are. In this case, his “Pathway-2-Prosperity” website warned investors to stay away from high yield investment programs because they offered unrealistic returns for little or no risk.  His scheme, known as “P-2-P”, claimed to have a strong 'moral foundation' which offered the 'common man' investment opportunities usually only available for the very rich.

The US Attorney for southern Illinois is handling this case.  Some of the charges carry up to 20 years in prison and $250,000 US in fines. Let’s hope that more of these HYIPs find their way into the courts.  Maybe some serious jail time will put a chill on the people behind HYIPs. The US investigators believe that the operator of the website alone received $500,000.

To read previous posts on this and other topics, click on Let’s talk about investing.

I continue to write about High Yield Investment Programs (HYIPs).  Today I googled the category and the first thing that popped up under Sponsored Links was “Need a good HYIP?”

It linked to CenTex Products -- Premier Oil & Gas Investment products.  As soon as you open the ad, a long and tedious video starts playing, describing the history and process of drilling for oil.  I am not sure how clever this promotional video is today when we are all reading about the effects of the disastrous oil spill offshore  along the US Gulf coast.

CenTex Products promises up to 77% annual return on investment with monthly dividends with headlines “low risk and high yield.” Really?

There is no information on who the principles are in this company or where it is situated, except to say that it is researches the best investments sectors in energy markets.  All you have to do is fill in the form on the right side of the page, and you will be connected to an investment consultant who specializes in international energy investments.

In small print, under click here for a Free Guide, it says “5,000 Euros minimum investment.”

It plays on the environmentally conscious individual by describing these as “green energy investments” and cleverly links it to ecomagination , which is a short ad about Plugging into the Smart Grid, sponsored by General Electric.  I wonder if General Electric knows that this HYIP (described by Wikipedia as a “type of Ponzi ) is using its good name.

I then looked at the website. It raises even more red flags.  The company is headquartered in Panama City.  There is no information about management, directors or corporate governance.  There is no research posted under research. 

Remember it is relatively easy to create a website, using content to make it look legitimate. The real purpose of the ad and website is to get your personal information.  Please don’t give it to them.

The answer to the question asked is no, there is no such thing as a good HYIP.

To read previous posts on this and other topics, click on Let’s Talk about Investing.

People are so inventive.  This is the eye-catching headline for Riding the Ponzi: The Ultimate HYIP Investment Guide .

“Discover How to Take Back the $1000’s You Lost In HYIP Investment by Mastering the Art of “Riding the Ponzi.”

I have been writing about HYIPs (high yield investment programs) for the last couple of weeks. As we’ve learned from the Genius Funds example, people all around the world are falling for these on-line schemes in droves. Promoted heavily on the internet, these high return programs are a type of Ponzi scheme.  

I believe that it is attracting the attention of young people who use the internet for just about everything, including investing online.   

Read the story of this person who fell for an HYIP …“It sounded like a legitimate opportunity with a very high return on my investment. ...The website looked professional and well polished.” Now we know why financial life skills training should be mandatory across the country.

This person, who supposedly lost serious change on an HYIP, turns adversity into opportunity by asking, “is there a legitimate way of making money off these scams?” He/she then creates a guide that shows you how to make money and “score big” with HYIPs. The manual gives step-by-step instructions on how to earn thousands by investing in Ponzis, HYIPs and Pyramid schemes. 

What the writer fails to mention is that in a Ponzi scheme, one person makes money at others’ expense. When these schemes collapse and they inevitably do, the people that still have money invested lose it all.  In my opinion, there is no legitimate way to make money with HYIPs.

To read previous posts on this and other topics, click on Let’s talk about investing.

Wouldn’t you be reluctant to send money to a website that has bad grammar and spelling mistakes? Take this site for example. It is called HYIPNEWS. 

On the left, you have a column entitled Don’t Investing that lists a number of companies that (I guess) you are not supposed to invest in.

Under Changes in Plans, forexica.com tells people “you can invest in them from yesterday with new percents…”

Under Exchange Feature, Truearn.com says, “I have another exciting news for you all.”

Then there are the rotating internet ads that offer 105% after one day, 290% after 25 days with 'DDOS protection'.  I tried to find out what DDOS protection is. Evidently, it stands for Distributed Denial of Service. What in heaven's name is that?

These HYIPs have invented new terms that sound a bit out of this world.

Wikipedia, the on-line encyclopaedia, describes HYIPs as a “type of Ponzi scheme”" I think that Charles Ponzi would be embarrassed by the use of these weird acronyms, typos and grammatical errors. It must be amateurs administering these funds, not professionals.

To read previous posts on this and other topics, click on Let’s talk about investing.

Look at these returns.
Ance Finance.com 
6% hourly for 21 hours, 135% after one day, 75% daily for 2 days, 175% after 2 days.

ChokoMoney 
135% after 7 days, $3,000 maximum deposit. Wow!

These high yield investment programs (HYIPs) are promising more than what you could make on a lucky day gambling in Vegas.  This Vegas Guide and Gaming Tips website suggests you can get about:

• 1.4% playing craps (drops to about .7% with odds bets)
• 1.5% playing blackjack
• 5.3% playing Roulette.

Some of those percentages are similar to the daily returns that some of the HYIP schemes promise.  Do you think you could beat the house in Vegas every day?  No?  Do you believe the HYIPs can beat the house every day?  Neither do I. The HYIPs promise unbelievable returns that are, in my opinion, complete fiction.  (HYIPs are according to Wikipedia, a “type of Ponzi scheme.)

What’s the difference between gambling in Vegas and investing in a HYIP scheme?  In Vegas, you know the odds are stacked against you, but at least you have the chance of winning and having some fun in Vegas.  With a Ponzi scheme, you stand to lose everything when the scheme collapses.  And that is not fun.

To read previous posts on this and other topics, click on Let’s talk about investing.

I have been looking at these high yield investment programs and wondering who actually invests in them. Wikipedia says that these investment schemes are a “type of Ponzi scheme”.

People tell me that setting up an account can be very complicated. Some HYIP funds insist on verifying bank wire transfers by demanding personal information (passport, driver’s license). I would hope that people would object to sending such sensitive information to these on-line investment schemes.

Others have no such requirements. However, red flags are raised when you learn that the money is wired to one country while the company is registered in another with a telephone number in a third country.

Many of these schemes use two payment systems – Liberty Reserve and Perfect Money. In the case of Liberty Reserve, you first have to put your money into an authorized exchanger account in order to transfer your money to Liberty. Eyebrows should be raised when you see that some of these exchangers are in located in Russia where it is believed that there are a lot of computer hackers. Some require the use of yet another level of exchanger to get money into the system. To make matters worse, many of these exchangers charge fees that can be a high as 30 to 50% of the amount being transferred.

If it is this hard to give them your money, how hard will it be to give it back.

In my opinion, the more difficult it is to follow the money, the more likely it is a scam. It also looks as if every step of the way someone, somewhere, is making money from your money.

I would love to hear from people investing in these schemes to find out what their experience is. 

To read previous posts on this and other topics, click on Let's talk about investing.

PanaMoney Technologies, Inc. is an on-line Panama-based investment scheme that appears on some of the top ten HYIP websites. Wikipedia, the free on-line encyclopaedia defines these funds as a “type of Ponzi scheme.” In my opinion, PanaMoney has all the markings of a Ponzi.

It continues to amaze me that so many of these funds are touted on the internet. Worrisome because someone, somewhere has to be making money on these schemes.

I looked at the home page of PanaMoney.  Here are just a few of the claims made and some questions to ask.

1. “2.8% daily for up to 180 days” How can these kinds of returns be sustained?
2. “No trading risk to your investment”  Doesn’t every investment have risk?
3. “String along with our high qualified and experienced staff in managed forex trading”  Are they qualified?  Have they taken commodity, option trading or future trading courses?
4. “Innovative technology automated forex trading system … uses no leverage along with unique technologies” What does that mean? Forex trading systems are all based on leverage.

I could go on. Using forex trading to deliver rates of return that are so high is a huge red flag.  Forex stands for foreign exchange. These markets are very volatile. It takes expert knowledge to understand how currency exchange rates work. 

PanaMoney claims to have a “Safety fund which provides the required insurance coverage”. In my opinion, this is just another ploy to convince people to send money. There are no warnings about potential losses, just a lot of confusing and poorly written information that just doesn’t make sense.  

Please tell your friends to stay away from these funds. Don’t wire any money from your bank account unless you want to lose it all.

To read previous posts on this and other topics, click on Let's talk about investing.

One of the worst aspects of HYIP’s is that many of these funds offer huge commissions to get people to convince friends and family to invest in them. It is perhaps the most odious part of a Ponzi scheme. According to Wikipedia, the on-line free encyclopaedia, these are all Ponzi schemes.

Referral fees or commissions are the incentive used to attract local promoters or “middlemen” to encourage others to send in their money. Cherry Shares for example offers a whopping 20% commission while Umba Fund, Investment-A and Golden Trust offer up to 10% commissions. Think about it.  A second tier of people are given an exceptional incentive to round up more people and convince them to invest in an outright Ponzi scheme.

We know that Ponzi schemes collapse eventually, and that’s when people lose their entire investment.  The consequences on those people can be very devastating.

We did a study a number of years ago that looked at the social impact of investment fraud and learned that it affected people’s emotional and physical health, it affected their relationships with their friends and family.  People are embarrassed, ashamed and don’t want to talk about it.  Frankly, the effect of this type of white-collar crime is as great on a person as it is with violent crime.

Talk to your friends. Tell them to be wary of anyone trying to sell them a fund in this category. Explain to them that these on-line investment schemes are all over the internet.  There are hundred and hundreds of them, promoted through social media.  Some translate their information into many languages.  All of them offer investors a rate of return so high it could not possibly be earned through legal methods.

To read previous posts on this and other topics, click on Let's talk about investing.

If I haven’t convinced you yet that HYIP’s (High Yield Investment Programs) are Ponzi schemes, then let me try again. The returns promised in these funds just aren’t possible.  Here is an example.

PanaMoney Technologies, Inc. claims to offer up to 2.8% per day for investments over $20,000US.  With this example, you would have $120,800US after 180 days and if you re-invested that amount, you would end up with about $730,000US according to the hyipinvestment.com calculator.

Even if you averaged 1% a day, a common promise of HYIP schemes, your $20,000US investment would be worth $156,800US after one year. The average house price in Vancouver is $500,000.  If you were to invest that $500,000 at 1% per day, you would end up with over $2.3 million after one year.  Who needs a 25-year mortgage?

Sounds incredible doesn’t it? Ask yourself this.  If such trading programs were legitimate, why wouldn’t we all be investing in HYIP’s instead of in mutual funds, stocks and bonds?  Or why wouldn’t other financial institutions be offering you competitive rates? Because it is impossible to deliver these returns on any kind of sustainable basis.

Here’s a guarantee you can believe in.  If money grew on trees the way HYIP programs suggests it does, I would not be sitting here writing this blog. Instead, I would be retired, living in a multi-million retirement home on an exotic island somewhere in the Pacific.

To read previous posts on this and other topics, click on Let's talk about investing.

Wikipedia, the free on-line encyclopaedia, says unequivocally that these on-line investment opportunities are a “type of Ponzi scheme.” There are hundreds of them offered on-line, coupled with other websites which rate and analyze their performance, including their ability to pay.

When the BC Securities Commission banned Genius Funds, a high yield investment program, from selling securities in British Columbia, we learned that many investors from all over the world were investing in this fund. Calls came in to our inquiry line and comments were sent to our InvestRight.org blog.  It told us that this whole category of funds merited some attention.  We needed to warn investors about the ramifications of sending your money to invest in these funds.

Take a look.  See what you can find out about who is managing these funds, where they are located and any explanation about how the money is being invested. Some  information may be given. Often there is no hint as to who manages the fund. You may find out that the company is based in the Seychelles, the British Virgin Islands or Panama.  Interesting to note that many companies are incorporated in countries with lax fraud laws to secure immunity from laws in other countries. 

You might also want to do some research on the internet payment systems: Liberty Reserve, Perfect Money to name two.  Read some of the words.  “Liberty Research is protected by an offshore Trust… incorporated under the laws of Panama”, for example. In short, do your homework.  And remember that all Ponzi schemes eventually collapse and investors lose all of the money that they have invested.

Click on Let's talk about investing to read other blogs on this topic and others.

For the past couple of months, I have been writing about Genius Funds, also known as Genius Investments, which was illegally selling securities through its website, offering investors a rate of return so high it could not possibly have been earned through legal methods.

Now Genius Funds seems to have disappeared, but it turns out there are hundreds more of these types of investment funds being offered to investors on-line.  They belong to a category called High Yield Investment Programs (HYIP’s). Wikipedia, the on-line free encyclopaedia, makes no bones about it.  These are all Ponzi schemes.

By now, people should have a much better understanding about what a Ponzi scheme is after two very high profile cases – one in the US (Bernie Madoff) and one in Canada (Earl Jones).  Both men are in jail, after having received maximum sentences, leaving many people without their life savings and little or no chance to recover the money.

So here we have with HYIP’s, in my opinion, hundred of funds being promoted on-line through a whole variety of websites doing just what Bernie Madoff and Earl Jones did.  Promising unsustainable returns by paying investors with the money invested by new investors.

Take this one fund called Forex Paid Me.  It is offering 5.5% hourly for 19 hours, 13% after one day, 70% after two days, 165% after two days.  Just do the math. Not legally possible. Ever.

I plan to write extensively about HYIP’s.  Why?  Because the barrier of entry is almost non-existent and if Genius Funds is any example, a lot of people are losing money to these types of schemes.  Another reason why I want to talk about HYIP’s is because many of these funds offer commissions to  individuals who convince friends and family to invest in it– thus causing harm to other people.

To read previous posts on this and other topics, click on Let's talk about investing.

I have written a great deal about Genius Funds since we issued a Notice of Hearing on February 12, 2010. The hearing took place in Vancouver and the Commission issued permanent orders again Genius Funds.  No one representing Genius Funds appeared on its behalf.

As I emphasized in my last blog, BCSC did not shut down the website. It did not prevent Genius Funds from sending funds to investors.  What it did do was confirm that Genius Funds is not registered to participate in BC’s securities industry and it permanently banned web-based Genius Funds, also known as Genius Investments, from selling securities and engaging in investor relations activities in British Columbia.

To read previous posts on this and other topics, click on Let's talk about investing.

It has been awhile since I last wrote my first blog, Genius Funds – Beyond Belief. Since then, a whole series of events have unfolded, beginning with our temporary order alleging that the Cyprus-based company had breached BC securities laws.  Since then, several Canadian provinces have issued investor alerts, the Alberta Securities Commission has cease traded it, and the Cyprus Securities and Exchange Commission warned that the company is not registered or regulated by the Commission.

Comments to us and on Facebook suggest that the Canadian government shut down the website. Someone posted a statement from a “Mark Stelvo” from Genius Funds saying “it is currently updating its website to comply with the ruling from the Canadian Judicial System.”

Simply not true.  While several Canadian provinces have issued warnings and temporary orders, they do not have jurisdiction to shut down the website.  If the website is indeed shut down, investors need to recognize that Genius Funds is, in my opinion, a classic example of a category of funds known as high-yield investment programs.  Plain and simple, they are nothing more than another name for a Ponzi scheme.

As stated in Wikipedia, a high-yield investment program (HYIP) is a type of Ponzi scheme, which is an investment scam that promises an unsustainably high return on investment by paying previous investors with the money invested by newcomers.

So please tell you friends to avoid HYIPs at all costs, no matter what the website looks like, no matter how easy it is to send money! In the end, they all collapse and investors are left wondering what happened to their investment.

To read previous posts on this and other topics, click on Let's talk about investing.

I have been blogging about this Cyprus-based company for some time. On February 12, we issued a temporary order against Genius Funds alleging that it had breached various securities laws.
 

Last week, the Alberta Securities Commission issued an interim cease trade order against the company alleging that they have engaged in illegal trading and distribution of funds.
 

This morning I was pleased to see that the Cyprus Securities and Exchange Commission issued a warning stating that Genius Funds “is not regulated by the Commission and the authorisation with the number CIF 087/07, which the above mentioned company alleged that it possesses, is fake.”
 

Last night, we received a comment which we have posted, blaming us for warning people about a possible Ponzi scheme.  Sadly, this is a predictable response from someone who thought that the offer of such high returns (1.9 percent daily on one fund and up to nine percent on a second fund) was possible. Clearly, Genius Funds investors failed to question why these funds can offer returns that are significantly higher than any bank or financial institution offers.
 

We don’t know how many people have wired money to this website. It could be in the thousands.  Remember the website promoted the funds in seven different languages. This fund was promoted extensively on-line, using social websites and classified on-line ads.

As we have seen in so many other cases, when these schemes fall apart, the first response by investors is to deny that it is happening and to blame the messenger. They are often angry and won’t accept advice that tells them that a particular scheme is not viable.

After reality sets in, the tone and response from investors is remarkably different.   At this point, they have to face the grim reality that they probably have lost most, if not all, of the money invested.

To read previous posts on this and other topics, click on Let's talk about investing.

One of the responses I received regarding Cyprus-based Genius Funds really puzzles me. In one of my blogs, I ask “is Genius registered with any securities commission or any other regulatory body?”

The comment back was “YES! If you had done your due diligence you would have been easily able to find out that they are licensed to operate as a Cypriot Investment Services firm since 2007.”

They may be incorporated as a company in Cyprus, but they are not registered with the regulator to trade securities. Check for yourself on the Cyprus Securities and Exchange Commission. 

We issued a temporary order against web-based Genius Funds on February 12. Since then other Canadian provinces have also issued warnings to investors not to do business with this Cyprus-based company. 

I have been writing about this for a week to question the very high returns Genius is offering to investors and to ask anyone interested in this fund to do their due diligence first before sending any money. 

Get a second opinion.  Ask your banker or accountant what they think of Genius’ offer of 1.2% daily or 9% weekly returns. 

Check out our program Protect Your Money – it will help you do your homework.

To read previous posts on this and other topics, click on Let's talk about investing.

I have received more surprising responses to my series on Genius Funds.  You will recall that we issued a temporary order against this Cyprus-based company citing its breach of various securities laws. Since then New Brunswick and Manitoba have both warned investors not to do business with this Cyprus-based investment fund.

One comment, in particular, interested me:  “… managed forex account opportunities if you know where to look that offer 25-40% returns.” This was in response to me saying “in my view, whopping returns of 1.9% daily and up to nine percent weekly are impossible to achieve.”  

So let’s talk about FOREX, which stands for foreign exchange, for a minute. The forex market is about changing currency for another by simultaneously buying one and selling another.  Profit and losses are dependent on the fluctuations in the exchange rate between two currencies.

Before you invest in the FOREX market be aware that:

1. The forex market is complex and volatile - it takes expert knowledge to track and understand the many variables that affect currency exchange rates.  Without this knowledge, you are likely to lose your money.
    
2. There are forex scams – the promise of high returns with low risk in the FOREX market is a red flag that the opportunity may be a scan.
    
3. Trading on borrowed money can increase your losses – the more money you borrow to invest in the FOREX market, the higher the risk of losing it.

It does not take a genius to question such high returns – returns that are higher than any bank or financial institution can offer.  It just takes common sense.

With the temporary order, Genius Funds cannot engage in any investor activities in the province of BC.  Nor can it trade in securities.  Tell your friends.  Do not do business with Genius Funds. Check out our program Protect Your Money it will help you do your homework.

To read previous posts on this and other topics, click on Let's talk about investing.

The Manitoba Securities Commission issued a warning to local investors not to do business with Cyprus-based Genius Funds because it may be operating illegally in the province. The Vancouver Sun also referred to Genius Funds in a recent article about investment fraud month. Last week, the BC Securities Commission issued a temporary order against Genius Funds for allegedly breaching various securities laws.

Genius Funds is offering high yield investment funds that supposedly give investors between six and nine percent returns per week. In my opinion, these returns are impossible to achieve without being a Ponzi scheme, where money from later investors is used to pay the promised return to earlier investors.

Genius Funds is offering people commissions to refer others to the fund to make an investment.  Genius Funds is being promoted on social media websites and in online classified ads in different Canadian provinces.

Please tell your friends and family not to invest in Genius Funds.  If you know anyone who has had dealings with Genius Funds, please file a complaint on our website or contact our inquiry line (1 800 373 6373) toll free across Canada.

To read previous posts on this and other topics, click on Let's talk about investing.

We issued a temporary order against web-based Genius Funds and the New Brunswick Securities Commission issued an Investment Alert against Genius Funds. Our temporary order alleges that the Cyprus-based company has breached various securities laws.

Genius funds offer whopping returns: 1.9% daily on one fund and up to nine percent weekly on a second fund.  In my view, these returns are impossible to achieve.

Some investors have noted that Genius has a “good track record” – and go on to say that “they never failed to pay me.”  This is from an investor of five months.

Is that reassuring?  Have we already forgotten the lessons learned from Bernie Madoff and Earl Jones – both of whom were in business for a long, long time before their schemes collapsed and investors lost millions?

Much more important are the questions that you need to ask to determine if it is a legitimate investment. 

Why not ask your bank manager or someone independent of the deal what he or she thinks about this investment?

Are there any restrictions on reselling or getting your money back?  Is Genius registered with any securities commission or any other regulatory body?

It does not take a genius to question why these funds can offer returns that are much higher than any bank or financial institution. It just takes common sense.

With the temporary order, Genius Funds cannot engage in any investor activities in the province of BC.  Nor can it trade in securities in BC. Tell your friends. Do not send any money to Genius Funds. Check out our program Protect Your Money – it will help you do your homework.

Click on Let's talk about investing to read other blogs on this topic and others.

I continue to write about this Cyprus-based company because people may be seeing their offers of 1.9 percent daily or nine percent weekly on social media websites where people are promoting Genius Funds. They may also be seeing the advertisements in on-line classified ads.

Last week, we issued a temporary order against Genius Funds alleging that the company had breached various securities laws. Yesterday’s blog talked about responses to my blog that were surprising to me. Comments like “any person can … make over 100% on their money.”  In my opinion, claims of high returns raise all sorts of red flags.

We are a securities regulator and unfortunately, we see all to often that people fall for the age-old offer of high returns with no or low risk. There is no such thing as high returns without risk.  Doesn’t exist.  Not possible in a legitimate investment.

Take Gold-Quest International for example. We issued an investor alert in March 2008 stating that we were investigating an investment that offers people unusually high annual returns – 87.5 percent – and commissions for bringing in new investors.  In this case, Canadian investors were approached to invest in a “family and friends private placement program” in which Gold-Quest International, an offshore company, would trade in foreign exchange markets (forex) on their behalf.

Persons supposedly representing Gold-Quest have told investors that they can earn money by referring new investors to the program. They were offered commissions of 10 percent of the amount the referred person invests.  These people were not registered to sell securities in British Columbia.

So please pay attention.  Don’t believe everything you read on the internet. Do your homework. With the temporary order, Genius Funds cannot engage in any investor activities in the province of BC.  Nor can it trade in securities in BC.

To read previous posts on this and other topics, click on Let's talk about investing.

I received two surprising responses to my blog last week about Genius Funds. In my blog, I said “If you can believe it (and I hope you don’t) Genius Funds is offering payments of up to 1.9 percent daily on one fund and up to nine percent weekly on a second fund.”  I reminded people of the old adage, if it is too good to be true…

The reason I was writing about this Cyprus-based company was because the BC Securities Commission issued a temporary order against Genius Funds, citing its breach of various securities laws.

Here’s what one correspondent said: “Any person can invest in Funds anywhere and make over 100% on their money.” Here’s what another one said: “Genius has a “lock in” period of capital for 9 months so they can actually work in stock market, futures and forex with your money for 9 months…they pay a very high interest, but they also diversificate in all the world.”

Let me take you back to a Ponzi scheme called Manna Trading Corp. In this case, Manna convinced investors to loan it money by promising significant monthly returns. Manna told them that their money would be managed by experienced traders with a history of producing exceptional returns through foreign currency trading. Manna was promising returns of not less than 20% a month. Sound familiar?

At the Manna hearing, Dr. Peter Klein, an expert in international banking and trading, gave an opinion about promised returns.  He concluded it was simply impossible to generate returns of even 5%, month after month, through any legal trading or investing in any financial markets. 800 investors lost $10m US in this scheme.

 From my experience, all Ponzi schemes offer high returns. That’s how they extract money from investors. 

So please pay attention. With the temporary order, Genius Funds cannot engage in any investor activities in the province. Nor can it trade in securities in BC. 

Click on Let's talk about investing to read other blogs on this topic and others.

Last week, we issued a temporary order against Genius Funds, alleging that the Cyprus-based company had breached various securities laws.

So let’s start with the name of the fund. I believe it was chosen to convince investors that these funds are special because the word genius means a person or body of work of surpassing excellence. A work of genius, when it truly is genius, will fundamentally alter the expectations of its audience.  However, in this case, Genius Funds is offering returns to investors that go beyond surpassing excellence – in my view they are impossible to achieve. 

If you can believe it (and I hope you don’t) Genius Funds is offering payments of up to 1.9 percent daily on one fund and up to nine percent weekly on a second fund. Remember the old adage if it is too good to be true…

There are social media websites where people are promoting Genius Funds. Additionally, Genius Funds advertisements appear in online classified ads in different Canadian provinces.

With the temporary order, Genius Funds cannot engage in any investor activities in the province. Nor can it trade in any securities in BC. 

So spread the word. Tell your friends. Do not send any money to Genius Funds.

To read previous posts on this and other topics, click on Let's talk about investing
 

The last couple of days of media coverage make you believe that maybe there is a Ponzi scheme epidemic going on in North America.  Take these three items. 

• Earl Jones sentenced to 11 years Globe and Mail 
• Pigeon Fever Morley Safer on 60 Minutes
• Mensch next door charged with Ponzi scheming: printer and master pianist suspected of $27 million fraud Globe and Mail

I urge you to watch Morley Safer and read the Globe and Mail piece. The well-worn phrase, truth is stranger than fiction, is definitely the case in the stories told here.

Even though most people now understand how a Ponzi scheme works, I am going to list five steps to running a Ponzi scheme:

1. Approach investors whose trust is easy to win over. Friends and families are less likely to ask questions and overlook red flags.
2. Create a highly lucrative investment strategy which promises high returns that are hard to turn down.
3. Provide a convincing paper trail – use letterhead of reputable banks, accountants and even regulators!
4. Ask the initial investors to bring in more friends and acquaintances.  This is the rob Peter to pay Paul aspect.
5. Make it feel like an exclusive offer.  It makes the investor feel special, one of a few who will make lots of money.

Earl Jones was sentenced to serve 11 years. Because his crime is considered non-violent by the courts, he might only serve one sixth of his sentence and be out of prison in 22 months – fall of 2011. Cold comfort to the victims who have lost their life savings.

Ponzi schemes will be with us for a long time, no matter how severe or light the penalties are.  Investors must learn to think twice before investing their money, especially if someone close to you makes the offer.  Don’t put your trust in close friends and family; put your trust in doing your homework and getting a second opinion.

Click on Let's talk about investing to read other blogs on this topic and others.

The saddest part about the 158 clients that Earl Jones defrauded out of $50 million, many of whom crowded into a Montreal courtroom Monday to hear him sentenced to 11 years in prison? It didn’t have to happen.

Jones held himself out as a legitimate financial advisor. But if his clients had checked to see if he was registered to provide the services he pretended to provide, they would have seen that he was not. Not finding Jones among the tens of thousands of registered investment advisors in Canada is the red flag that could have kept people from trusting him with their money.

Checking advisor registration is the first step to take when you start thinking about trusting someone with your investments. Even if you’re already working with an advisor, you owe it to yourself to check his or her registration. It’s easy to do using the new CSA National Registration Search. And what you learn by checking will make you a more involved and informed investor. This is especially true if you combine your registration search with other kinds of background checks, like looking up an advisor’s disciplinary history and searching his or her name on the internet.

Working with a registered advisor is the only way to ensure that the laws governing advisor conduct can protect you, if you need them. The InvestRight Guide to Investing  offers step-by-step directions for conducting background checks, including checking registration. Follow them and you could save yourself from being taken by the likes of Earl Jones.

To read previous posts on this and other topics, click on Let’s talk about investing.

On the eve of this city’s biggest undertaking, the anticipation for Canada to win lots of Olympic medals is palpable. Polls on news sites ask people to vote on whether Canada will win 20 or more medals. It’s as if there wasn’t enough pressure on the athletes already, so let’s pile it on.

Some sports enthusiasts are behaving just like aggressive financial promoters, promising you huge returns on our Olympic investment, but forgetting to mention the risks.

Who knows how well Canada will do in the 2010 Olympics. Just like investing, you can’t promise lots of gold medals without assessing the risks. Even men’s hockey is not a sure thing. 

I will however cheer our team on as they compete against the world’s best and hope, like my investments, that I get a reasonable return. What that means in Olympic terms is some exciting and unexpected wins over the next couple of weeks.

Click on Let's talk about investing to read other blogs on this topic and others.

In this week’s Macleans magazine, Jason Kirby talks about the myth that Canadians are cautious, prudent and play it safe when it involves their own money. To make his point, he describes how Canadians are piling on debt by taking on large mortgages at record low interest rates as the housing market heats up again.

But its not just mortgage debt that is the problem. The Credit Counselling Society of BC helps people resolve their debt woes.  Over the past two years, it has seen more people asking for help carrying more consumer debt than before.  Five years ago, it was common to see consumer debt loads of $40,000 for example. This year the Society is counselling people who are carrying debt loads over $200,000.
 
*Two surveys released this week confirm some troubling trends in BC: consumer confidence is on the rise in BC at the same time that 65% of British Columbians say that they are concerned about their current debt level. 

What’s going on here? We thought we were smarter than the Americans were. Not so, it seems. Which is why we need people to understand a fundamental principle:  If you don’t have enough money to buy something, don’t buy it!

Last year, we partnered with the Financial Consumer Agency of Canada to produce an on-line, interactive program that helps people learn how to handle their finances and avoid financial problems in the future. It is called The City. It has eleven modules covering everything from doing a lifestyle reality check to preparing a financial plan.

We need people of all ages to go to The City and learn how to avoid making costly mistakes – like falling deep in debt, choosing poor investments or even getting involved in financial frauds.

*RBC Canadian Consumer Outlook Index is based on an online survey of 1,018 Canadians conducted by Ipsos Reid between December 8 and December 11.  The Conference Board survey was based on 3,000 telephone interviews conducted between January 7 and 24.

Click on Let's talk about investing to read other blogs on this topic and others.

Research shows that just under half of Canadians have a financial advisor. If you rent your home, or have more debt than savings you’re less likely to have an investment advisor. By comparison, if you have a family, are female, or older than 65 then you’re more likely to have an advisor.
 

Being the government agency that registers advisors to buy and sell investment products, the BCSC thinks it’s important for investors to work with registered advisors. But the research also shows that 60% of the Canadians who have an advisor say they rely solely on that person’s advice, and that adds needless risk.
 

The risks connected with over-reliance on an advisor are fairly simple. You could end up with investments in your portfolio that you don’t understand or have higher fees than other products. You could also end up with investments that aren’t suitable for your risk tolerance or investment goals.
 

The new InvestRight Guide to Investing  can help you get more involved with your investments. We’d like to see you working with your advisor like you would with a business  partner, not putting them on a pedestal as an all-knowing authority.
 

Have a look at Chapter 4: Making investment decisions and the Worksheet for choosing an investment . These will help you define your risk tolerance, research public company investments, and ask the questions that will help you decide if something your advisor suggests is suitable for you.
 

To read previous posts on this and other topics, click on Let's talk about investing.

This week, the Canadian Securities Administrators issued their second annual Enforcement Report. If you are interested in finding out more about how we enforce securities regulations across Canada, it is a must read.
 

We put together this annual report because we want Canadians to understand the role we play in protecting investors.

We want them to know that we have many ways to protect investors. For example, the tools we use to disrupt and stop illegal activity. Take freeze orders. We use this power to disrupt a fraudulent activity by freezing the assets. Over the past four years, we have helped to return over $20 million previously frozen assets to investors and victims of fraud.

Cease trade orders. We can use these orders to protect investors by stopping a potentially illegal activity while an investigation is underway.

We issue halt trades to address suspicious market conditions by stopping trading. We issue reciprocal orders to protect BC investors from doing business with people who have carried out misconduct in other parts of Canada.

These are just some of the tools we use to disrupt and stop fraudulent activity. 

My main message is that we can’t use these tools if we don’t know there’s a problem.  Reporting to us, either through our inquiry line or online, is often the only way we find out. Sometimes it is easier for friends and family to report than the person directly involved in a suspicious investment.

In any event, we urge you to spread the word to talk to us even it you aren’t sure that something illegal is going on. It is better to be safe than sorry, to use that old cliché.

Click on Let's talk about investing to read other blogs on this topic and others.

Rare is the investment advice that meets me where I am: an adult with financial responsibilities but only the sketchiest of financial education. So, while I can’t say I leapt at the chance to update and expand the InvestRight Guide to Investing  last year, I did approach it with a sober “this will be good for me” attitude. Now that it’s finished and ready for public consumption, it turns out that it was good for me. I learned the very things I most needed to know - how to think about making investment decisions and what questions to ask at every stage. And I’m dying to know how it works for you, too.

Here are 10 reasons why the new InvestRight Guide to Investing might just become your favourite investment resource for 2010:

1. Questions, questions, questions: The advice you get depends a lot on the questions you ask. Every chapter of the guide outlines the types of questions you should ask and every interactive worksheet expands on those questions to help you gather answers detailed enough to make informed investment decisions.

2. Encouragement: Only 25% of Canadians have a financial plan, even though more than 60% say it is important to have one.
Use Chapter 1: Getting Started to remind yourself why you even want a plan, then make short work of calculating your net worth with the interactive Worksheet for planning your investments .

3. How to talk to your advisor: It’s never a good idea to put an advisor on a pedestal as the all-knowing authority. Chapter 2: Choosing an Investment Advisor: the Interview shows you what you should know before you hire an advisor and what you should find out about the advisor you already have.

4. Advisor or planner: Know what you need. Investment advisors in Canada are registered by a securities regulator to provide certain services. Not so financial planners. Both serve an important role. Your job is to be sure you’re dealing with someone who is qualified to help you achieve your investment goals and you can read about it in 'Chapter 1: Getting Started.

5. Help with your homework: Chapter 2: Choosing an investment advisor walks you step-by-step through a simple due diligence process to find out if your advisor is registered to provide the services he or she offers or has ever been disciplined for bad practices.
Chapter 4: Making investment decisions points out some basic resources for researching companies you’re thinking of investing in. 

6. Don’t be duped: Wise investors always take the time to ask, "is this investment too good to be true?". Let the guide remind you that despite the vast majority of honest investment professionals there are also unscrupulous types whose goal is to enrich themselves ... and follow the protect your money link in Chapter 3 to find out more. 

7. Walk before you run: Anyone can learn to protect their financial interests by learning the basics: know your worth; set goals; ask questions; evaluate the answers; be sceptical; do a little research. And remember, it’s your money! The guide helps you do it all, and the Wise Investing Tip Sheet sums it all up.

8. Keep track: Go straight to Chapter 6: Worksheets to see how the guide’s five interactive worksheets make it easy for you to start a written financial plan, record your due diligence findings, and conduct intelligent conversations with your advisor or advisor to be. Chapter 3: Working with your investment advisor sets the groundwork for monitoring your investments so you can stay on track with your investment goals.

9. Invest in private companies: Well, maybe. But only after you’ve read Chapter 5: Investing in Private Companies and completed the worksheet that goes with it. Both will help you understand the risks and how to manage those risks if you decide to invest.

10. It’s free! Download it now  if you haven't already.
 

If ever there was a statement that must rankle the clients of Earl Jones, that one takes the cake. Responding to questions from the bankruptcy trustees, he says: “Its just me … my personality likes to help people … I knew most of my clients better than their kids knew them, and did more for them than their kids and their families.”

What kind of person can describe actions that destroyed people’s futures in that way when he goes on to admit that he used clients’ money for his benefit for over 25 years?

On January 15, in a Montreal courthouse, Jones pled guilty to several charges of defrauding Quebec pensioners of their life-savings in a complex Ponzi scheme. Even though it looks like he might receive an 11-year sentence, it is cold comfort to all of those people who trusted him with their money, estimated at $75 million.

One of the saddest parts of his testimony is the statement that he never used “cold calling.” In other words, he was able to get clients referring his services to their friends…and on and on it went.  Imagine how you would feel if you recommended using Earl Jones to a very close friend, only to find out years later that he was using the money to fund a very luxurious lifestyle. Terrible. That is one of the worst consequences of affinity fraud.

So the lessons learned here are clear. Don’t just take a friend’s recommendation at face value. Do your homework. See if the person is registered with the regulator. Earl Jones was not. Question guaranteed returns (8% in this case) from a special bank account. Not true. Not that any of this help Jones’ clients today, but it might prevent others from being caught in an illegal Ponzi scheme.

Click on Let’s talk about investing to read other blogs on this topic and others.

We received a comment on a blog that I wrote last August that we cannot publish entirely because it violates our comment policy. But the commenter made some valid points that we think should be addressed.

In the blog I talked about how fast a Google post brought Earl Jones to the public and Quebec enforcement agencies’ attention. I also lamented that even though the word spread fast once the whistleblower put the information on the internet, it was too bad that it took so long for people to become suspicious.

This comes from the whistleblower: “Although Earl Jones himself was not registered, legitimate banks like RBC and later BMO allowed Earl Jones to perpetuate his Ponzi scheme unchecked for nearly 30 years. Registered financial advisors transferred money to Earl Jones, often without proper authorization, because he was well known in their milieu .…”

I agree that we need to train banking personnel to help detect suspicious activities when dealing with clients’ money. We need more eyes and ears in the financial system overall aware so that such frauds can be prevented.  Two years ago, we developed an online fraud awareness program for front line staff working in BC credit unions. We also met with the Canadian Bankers’ Association urging the banks to train their staff in a similar fashion. I applaud the whistleblower for making this point.

Click on Let’s talk about investing to read other blogs on this topic and others.

In a recent column in the Montreal Gazette, Pierre Montreuil, a recent financial fraud victim, calls for a single agency, with serious legislative teeth, to deal with what he calls a “pandemic,” citing the Norbourg and Earl Jones cases that involved many people.

While these particular frauds happened in Quebec, they are the type of fraud that can happen anywhere.

Unfortunately, but not untypically, Mr. Montreuil ended up trying to get some attention to the problem from a variety of sources – two law enforcement agencies and one regulator. He found it frustrating, to say the least, but finally did get some restitution from the regulator. 

For the average person, our system of enforcing securities’ law is complicated. Depending on the nature of the contravention and the jurisdiction of the regulator, the case can be dealt with by the regulator or by law enforcement agencies (RCMP, provincial or municipal police) if there is evidence of criminal activity.

We need to do more to help victims in these types of cases. In BC, we are working with the police and other agencies within the securities industry to try to coordinate a victim’s response to their problem, particularly in cases that involve alot of people. Recently we had a case involving members of the South Korean community. We quickly put together a page on our website, provided translation services for victims to call in with their information, and coordinated that information with the other agencies involved.

Mr. Montreuil rightly argues that more “proactive prevention” is required, rather than “the after-the-fact investigations” that are the norm. I couldn’t agree more. But being proactive is not easy. What would really help is for friends and families of the victims to report anything suspicious to the police and to the regulators. You can report online or with a phone call (anonymously if you wish) to BCSC Inquiries.

Click on Let’s talk about investing to read other blogs on this topic and others.

In an article in globeinvestor.com, Dan Richards (Strategic Imperatives) makes the point that after last year’s market debacle, more people are doing their homework on how and where they should be investing their money. The net result is that they are asking tougher questions, requiring financial advisors to spend more time and effort responding with evidence and support for their advice.

That is good news. For too long, investors have been unprepared or not confident enough to play devil’s advocate with their advisor.  While it’s true that most of us have become much more comfortable questioning our doctors, it’s not true that we have been able to  question our financial advisors until very recently.

I would also suggest, as I have in a previous blog entitled What information must financial advisors give their clients, that financial advisors have to provide information to investors that is simple, easy to understand – and not just what is required by law. 

For example, everyone has to receive account statements every three months, unless the client asks for it on a monthly basis. It contains a lot of information – transactions, sales, purchases, transfers, the name and number of securities, the price and total value of the transaction. But, as Dan Richard rightly points out, people don’t want to read a lot of detailed information. Our attention span is short and most information that we receive, we don’t read because it doesn’t provide any value to us. 

So one of the vows you might consider making for 2010 is to request an annual or semi-annual chart that describes the value of your portfolio at the beginning and end of the year; the amount deposited into the portfolio and the amount withdrawn, including fees. This will give you a clear idea of what’s happened to your financial portfolio over a six to twelve month period.

If you are really on a roll, you also might want to ask you financial advisor to learn how to speak plainly and in a way that is easily understood, avoiding jargon and industry terms that you are not familiar with. Then, you can enter into a dialogue with your advisor that brings value to both parties.

Click on Let’s talk about investing to read other blogs on this topic and others.

Ben C. commented on the InvestRight.org visitor survey saying he was looking for  information on mining stocks, in particular about reading technical reports and summaries of mineral reserves and resources. 

Early stage mining exploration companies—like many other early stage companies in other sectors—are risky investments. It can take five to 10 years and cost many millions to find out if a promising claim has mineral reserves. It can take many more years and tens, or hundreds, of millions to obtain permits and build a mine before the company starts generating positive cash flow. While the potential for substantial gain from mining investments exists, it comes with the high risk of failure. When mineral projects fail or are abandoned, investors may be left with securities that have little or no value.

It’s important to face the risk-reward factor squarely if you’re interested in mining stocks. And Ben is wise to seek help understanding the technical reports that Canadian regulators require from mining companies at key milestones. These reports are filed on SEDAR for public viewing at no cost, but there’s no denying they can be dense, highly complex, and may not be written with the average investor in mind.

At InvestRight, we caution investors to put money only into investments they can understand. If you're prepared to spend some time learning about mining with an eye to investment, dig into the following resources:

• The InvestRight primer for investing in mining sets out 10 questions to ask about a mining or mineral exploration company before you invest. 
• The Association for Mineral Exploration in British Columbia (AME/BC) offers many resources including useful links, publications, and courses. A publication called Mineral Explanation Explained, “a general outline and user friendly translation of the technical materials found in news releases and analysts reports” is listed as “coming soon.” Life Cycle of a Mine, a one-page flyer from AME/BC, puts the long time-frame for mining investments into perspective.
• The Northern Miner, a mining trade news source, sells the book Mining Explained, which is listed as a “popular layman’s guide to mining.”
• BC Institute of Technology part-time studies in mining technology offers courses in the spring and fall. Contact faculty and advisors for further information.

Have you found a book, website, or course about the technical aspects of mining that would be useful to investors? Please share it with us and other readers by leaving a comment.

As Patricia emphasized in her most recent blog – “2009 - The Year of the Ponzi” – this has been a tough year for investors.  The recession has hurt investors and virtually every Canadian to some degree. Signs indicate that we are crawling out of the economic malaise, and the recent Globe and Mail article headlined “Return of the highly confident investor”  suggests more positive times ahead for investors. But it’s not surprising, that this time around, battered investors are taking a more cautious approach to where and how they invest their money. They are also less optimistic about what they should expect in return.

The Globe piece talks about the need for a long-term perspective in investing and the importance of a well-balanced portfolio, the recognition of the role that risk plays in investing and the need for realistic expectations.

Similar points of view are reflected in the advice given by a panel of international and national experts during the BC Securities Commission’s annual industry forum in October. Have a look and listen to what else the panel has to say in the segment, “Advice for risk-adverse investors,”  just uploaded on YouTube.

The entire Capital Ideas conference has been posted as well.

2009 might well be dubbed the year of the Ponzi scheme. In March 2009, Bernie Madoff pleaded guilty to 11 felonies and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors billions of dollars. On June 29, 2009, he was sentenced to 150 years in prison.

Late last spring, another alleged Ponzi scheme reared its ugly head in Montreal, namely the Earl Jones scandal. Jones was arrested on July 27, 2009 and was charged with four counts of fraud and four counts of theft. He was released on bail for $30,000. The case is in its preliminary stage with over 160 people claiming they have lost money. Police are investigating each claim, which may result in new charges.

These are two of the most famous cases, but there are more: Manna ($16 million) here in BC, Milowe Brost and Gary Allen Sorenson, ($100 million) in Alberta, for example.  You might want to look at the series we did highlighting the lessons learned from the Manna debacle on the InvestRight blog to understand how these types of frauds are marketed to the public.

Some of these frauds had been going on for a long time.  Here are a few reasons why they fell apart.  In general, investors start to try to withdraw their money at the same time that the perpetrators find it more and more difficult to bring in new investors, causing the scheme to collapse. This happens when people begin to get nervous or suspicious that the investment scheme is questionable. They try to get their money out before it falls apart. 

In other cases, people, short of cash for a variety of reasons including last year’s credit crunch, all of a sudden need money to look after their everyday living expenses. Too many people trying to withdraw money at the same time can cause huge problems for a Ponzi scheme. Other reasons could be that the perpetrator(s) think they are about to be caught, so they take the money and run as fast and far away as possible.

Here’s the point. Many investors invest their money in Ponzi schemes because of the generous returns promised. Often investors are convinced to join by friends, family and acquaintances, based on their initial experience with the investment.

Always question high returns promised with little or no risk and don’t take anyone’s word without doing your own homework. Check out our new program Protect Your Money before investing in a new investment.  Check out your advisor to see if he or she is registered. You might save yourself the heartache of losing money in a Ponzi scheme.

Click on Let’s talk about investing to read other blogs on this topic and others.

Despite all of the attention paid to the dangers of fraudulent investment schemes, promoters are still out there using tried and true methods.

Last week, I was sitting at home, quietly reading a book. The phone rang and a loud, very commanding voice said, “Hi I am (and he gave me his name)”.  He then began an aggressive speech (which was clearly taped) that talked about the oil and gas sector and how successful it had been over the past year. He announced that he had a very good opportunity that would give an investor 70% return annually!  He then said that all you needed was to “be liquid for $12,000” (investor jargon) and the returns would begin after 90 days.  The voice then told me to “Press 1 if I was an investor.”

I believe that I received a similar call several months ago. I think this is an ongoing scheme.

I tried to imagine how others might react to such a call, particularly if they were vulnerable in some way. 70% returns would have a special appeal to people with financial needs.  Would they even stop and consider how ridiculous the offer was?

Clearly, the calls are random calls and the individuals behind it must be finding enough people to cough up the money to make it worth their while.

We put together a new program called Protect Your Money to help people do their research before making a commitment to a particular investment.

If you get a call like I did, use this program to find out what steps you can take to protect yourself. I also found another US website that highlights all of the different techniques used to lure you into a fraudulent scheme. Take a look at it as well.  Share this information with your friends and family, especially if you know that they might be vulnerable to a pitch like this.

Click on Let's talk about investing to read other blogs on this topic and others.

Lately the Vancouver Sun has been publishing a series of articles about a company, which privately raised more than $220 million from 3,375 investors over a 33-year period to finance the development of the Gallowai Bull River property in southeastern BC. Most of these individuals were able to invest under the “accredited investor” exemption.

The exempt market generally applies to the sales of securities to investors without a prospectus and the advice of a registered dealer.  Recently, investors in this project filed a petition in B.C. Supreme Court alleging that the president of the company, Ross Stanfield, has operated the project in a manner oppressive to minority shareholders.

It is obviously a long and difficult story, which I won’t go into today. Read the articles by David Baines in the Vancouver Sun where you will get more information.

Many of those investing in Gallowai Bull River did so under very different rules for the exempt market than are in place today.

Today the rules are highly harmonized among Canadian provinces.  In general, “accredited investors” must have an annual income of $200,000 for two years.  Their financial assets must be more than $1million (not including real estate) or $5 million overall.

Today, when investors buy through an offering memorandum, there is a very clear statement in the form of a “warning” given to investors in private companies. It prominently advises that these types of investments are risky and high returns are illiquid.

Investments offered by private companies are not required to give the same ongoing disclosure (financial statements, press releases or material change reports) as public companies do.  In this case, you are largely on your own, without the investor protections that are required with a public company.

The securities are usually not listed on any stock exchange, which means your ability to resell them to liquidate your investment are extremely limited, if not impossible.

Here is the most important piece of advice to give to people considering an investment in a private company: Read the offering memorandum’s risk disclosure. Then consult a person who is not participating in the deal, e.g. lawyer, banker accountant, financial adviser or someone with business acumen, before making any decision to participate in the investment.

Click on Let’s talk about investing to read other blogs on this topic and others.

I was asked the other day what general disclosure advisors have to give to their clients regarding their accounts on an ongoing basis. Fiona Anderson of the Vancouver Sun wrote an article on the subject that is worth reading.

The answer is this.  Advisors are obligated to send account statements every three months, unless the client asks for it on a monthly basis.  It should contain basic information about dates of transactions, whether they are sales, purchases or transfers, the name and number of securities, the price and total value of the transaction. 

For many people, this information is often difficult to interpret and doesn’t provide a clear picture of just how your account is performing overall.  So you have every right to ask for information in a manner that paints a clear, simple picture of how your investments are doing. 

For example, you can ask your advisor to prepare a year-end chart that gives the following information:

• The value of my portfolio at the beginning and end of the year
• How much was deposited into my portfolio
• How much was withdrawn from my portfolio (including fees)

Then you should ask for a year-over-year comparison so that you can see how your account is doing over a longer period-of-time.  This is important information.

As well, look at our Guide to Investing worksheets that outline a whole range of questions to ask about your investments that will give you more useful information than what the monthly or quarterly statements provide.

Click on Let’s talk about investing to read other blogs on this topic and others.

A recent study by Ipsos-Reid this summer (CSA 2009 Investor Index ) showed us that fraudsters are moving away from using the internet or cold calls as the way to approach people. Instead, they are going back to the old-fashioned personal approach. This is what we call 'affinity' fraud. There is no doubt that this type of financial fraud is probably one of the worst because it destroys trust and relationships between family, friends, neighbours and whole communities.

Recent examples that have received media attention highlight just how pervasive this type of fraud is – Bernie Madoff, Earl Jones, Sung Wan Kim. So while the study shows us that the numbers of people being approached hasn’t changed, the way they are being approach has.  (We saw in 2006, much higher numbers citing random, anonymous email and telemarketing.)

Another worrying trend is that the number of people repeatedly victimized has increased since the 2007 study. We don’t really understand why, but we are looking for reasons.

Finally, we see from a whole range of US and Canadian research that suggests there is no single characteristic that describes victims of fraud.  However, we do know that they are more likely to be experienced investors, confident and educated – those aged 55 or older and/or with post-graduate degrees.

The lesson here is that no one is immune to fraud. Clearly, fraudsters do target through groups (churches, book clubs, investment clubs) and pursue professionals who earn good money. Everyone needs to know what Red Flags to watch out for.

We recently put together a new program called Protect your money to help people avoid being defrauded. Please go and take a look – it helps you recognize it, report it and protect yourself.

If you want to read other blogs about this subject and others, please go to our InvestRight blog.

On October 13, 2009, the BCSC issued an Investor Alert telling the public that it was investigating Sung Wan (Sean) Kim who was president of Cirplus Futures Inc, an exchange contracts dealer, and a prominent member of the local Korean community.

In the Alert, BCSC urged investors to contact the BCSC inquiry line to provide information about Mr. Kim or dealings with him. It also advertised its inquiry line and translation services to “Kim” investors in the Korean media.

Over the past couple of weeks, there has been extensive Korean media coverage reporting millions of dollars of losses.

Mr. Kim was arrested in Korea by police on or about October 18, 2009 and is detained pending a pre-trial hearing. BCSC issued a temporary order and notice of hearing that will be held on November 3, 2009 at 10:00 am.

The RCMP Vancouver Integrated Market Enforcement Team (IMET) has initiated a criminal investigation in relation to the alleged multi-million dollar fraud scheme involving Cirplus Futures Inc.

Today we published a webpage on our InvestRight website to keep investors, the public, and media up-to-date on developments that can be made public in the Kim case.

This year Capital Ideas is very timely. Business leaders and regulators will discuss how regulators should respond to the international credit market crisis and its fallout on the broader capital markets.  The panellists have impressive backgrounds and a wealth of experience:

• Doug Hyndman, Chair and CEO of the Canadian Securities Transition Office, Vancouver, BC
• Dr. Malcolm K. Knight, Vice Chairman, Deutsche Bank, New York
• Greg Tanzer, Secretary General, International Organization of Securities Commission (IOSCO) Madrid, Spain
• And Dr. Patricia Walters, CFA, Clinical Associate Professor of Accounting, Fordham University President, Disclosure Analytics Inc. New York.

Ian Hanomansing, host of CBC’s News in Vancouver and sometime host of The National will moderate the panellists. Discussions will range from how to manage systemic risk, globally and locally, to identifying the needs of retail investors going forward.

If you are interested in listening to this dialogue, the BCSC website will post the webcast on its website after December 1st, 2009.

On October 13, 2009, BCSC issued an investor alert announcing that the BCSC is investigating Sun Wan 'Sean' Kim, the principal of Cirplus Futures Inc., a Vancouver-based exchange-contracts dealer.

Anyone who has had recent financial dealings with Kim or is a client of Cirplus to contact the BCSC. A Korean translator will be available through our inquiries line at 604 899-6854 or 1-800-373-6393.

RCMP received a complaint about Mr. Kim on Friday October 9, which was passed onto the BCSC. The BCSC’s enforcement group is currently working closely with the RCMP on this case. 

Some background.  Cirplus Futures is a five year old foreign exchange 'futures' trading firm based in downtown Vancouver. As of Friday, October 9, Cirplus is being wound down under BCSC supervision.  Mr. Sun Wan 'Sean' Kim has been a principle of the firm since November 2002.  We don’t know where he is at this time. 

BCSC is very concerned that both Cirplus clients and others have invested their money with Mr. Kim.

It’s October but the chill people are feeling isn’t just from the temperature dropping outdoors as investors can’t help but shiver as they take stock of the financial mess from the past year. Add to this the stories of investment fraud victimizing people and it is no wonder that investors are feeling a bit left out in the cold. Where can people turn for help?

On the fraud avoidance front, we can help. As part of Investor Education month, we have launched an online, interactive tool entitled, Investment Scams: How to Protect Your Money. It focuses on some common methods that fraudsters use to approach potential victims – via friend and family or ‘affinity’, the Internet, seminars and advertisements.

Developed jointly by the BC Securities Commission and Alberta Securities Commission this online resource engages users with an opening quiz and testimonials to raise awareness of the ways fraudsters attract their victims. The testimonials are based on real cases depicting how people are drawn into scams.

The comprehensive tool provides information about how to recognize, research and prevent fraud. Offered as modules that can be easily accessed and shared, the resource provides investors with checklists and tips to help them evaluate and research investment opportunities for risks and potential fraud.  As well, there are features within the resource to help investors directly email questions to a person offering them an investment and submit a complaint to the securities regulators.

There’s even a YouTube video to support this tool.

We hope people will use to this new resource in the fight against financial fraud.

Back in 2006, the Canadian Securities Administrators (CSA) commissioned a major piece of research  that looked at Canadian investors’ skills and knowledge and the levels of investment fraud in Canada.  It was an illuminating study. We learned a great deal about our investing beliefs and our behaviour. For example, investors understood the importance of being informed investors, yet they fell short when it came to putting their knowledge into practice. The result was a more vulnerable investor to unsuitable or illegitimate investment opportunities.

This summer we conducted another investor index, surveying more than 6,000 Canadians. We found to our dismay that the number of Canadians with no savings at all had increased by 8% (from 28% to 35%).  On the good news front, the numbers of Canadians falling victim to investment fraud hadn’t changed. 

But here is where BC investors have to be alert. BC is way ahead of the pack (10% higher than the national average) when it comes being approached with an investment scam. Of further concern is the fact that British Columbians are the most likely to say they have an aggressive investment style, with 38% agreeing with this statement. This last point is consistent with our Eron Mortgage Study  where we learned that of those scammed, many were overconfident men in their 50’s. In the Eron Mortgage debacle, over 3,000 investors lost more than $180 million.

These are just a few of the findings in what is a very important piece of research. There is a lot to learn about Canadian investors.

Last week, BC and Manitoba issued an alert warning investors about a possible ‘recovery room’ scheme. Typically, these schemes involve companies that contact investors who may have lost money in a fraudulent or illiquid investment with an offer to buy their shares at an inflated price.

Once the investor agrees to sell their shares, a contract is drawn up, and they are asked to pay a fee to cover business costs. They are often told to wire a sum of money to an offshore bank account. The scammers take the money from this offshore account but do not repurchase the shares and the victim for a second time loses money.

The reason why we issue these investor alerts is to help investors avoid being scammed, in this case, twice.

Often investors do some homework to make sure that the company that they are considering investing in or doing business with is okay. A simple way is to Google the company by name.

By issuing these alerts, we hope that the information we have published about York-Rio Resources Inc. and Penn Capital Management Ltd. come up in online searches so that people avoid being targets of a ‘re-victimization’ scheme.

A colleague received an email a few days ago flogging the wonders of forex – trading in the foreign currency exchange market. Here’s part of the email: 

“You know, you can make forex traders work for you giving you around 1% per day. Professional company offers managed Forex trading accounts. It means: average returns of 1% per trading day; almost no time and no trading skills required; protection against trading losses; real-time Forex trading sessions; full control of your profits and many other features to take the most of managed Forex trading accounts .…” 

My colleague forwarded the email to me with her realization that the one per cent a day return boasted about equates to roughly 30 per cent a month. As she puts it, “Talk about too good to be true!” 

Now, I am not saying that this is never possible but is it likely that such returns are commonplace? I highly doubt it.

Before you get involved in the forex market, you should know the risks. We explain how complex and volatile this type of trading is and also warn people about forex scams. 

Foreign currency trading is a favourite ruse of fraudsters to make claims and promises about exorbitant investment returns. Just recently, an Oregon woman was sentenced to five years in jail for bilking $2-million US from 20 investors by promising them that she would generate profits for them in the forex market. It turned out she was running a Ponzi scheme for the most part. Closer to home, the Manna Ponzi scheme also enticed investors with the promise of using FOREX as a method to generate “double-digit monthly returns.” 

A few final notes about the email my colleague received: First, it was unsolicited. Second, there’s a mistake in the message. 

“…many other features to take the most of managed forex trading accounts .…” Shouldn’t that be make?

Both are signs that it may be part of a spam campaign. Be careful.
 

When I read the story about Anwar Badshah in the Surrey North Delta Leader, some obvious red flags leap out at me. Last June, he pleaded guilty to three counts of fraud over $5,000 and was sentenced to 18 months of house arrest by a provincial court judge in Port Coquitlam. BCSC investigators described the Badshah promotion as a Ponzi scheme.

This was a serious crime. Documents on our website show that at least 150 people had invested more than $2.2 million with Badshah Communications Group Ltd. by the time the investigation was initiated.  The effect on these investors’ lives was devastating as voiced in the impact statements provided to the court.

One of the most obvious red flags in this particular investment scheme was the promise of very high returns - 100 per cent return within months of investing the money.

Another important red flag was the fact that the company was not registered with BCSC, a legal requirement for selling promissory notes to investors. 

Finally, there was another hint that there might be something suspicious about this scheme. Mr. Badshah targeted members of the Fijian Muslim community, the community in which he was born and raised. This technique is called affinity fraud. It exploits the trust and friendships that exist in groups of people who have something in common.  Many affinity scams involve Ponzi schemes, making this a classic case of investment fraud. 

If you hear about or have been approached with a investment scheme that just doesn’t sound right, don’t hesitate to contact us by email or phone for a second opinion.

Today, the media are abuzz about Milowe Brost and the estimated $400 million losses from thousands of investors in Canada and the United States. The RCMP arrested Mr. Brost this week. They are now looking for his partner, Gary Sorenson, also from Alberta, who is believed to be somewhere in Honduras, presumably hiding from Canadian authorities. Both men were charged with fraud over $5,000 and theft over $5,000, following a three and a half-year investigation.

Unfortunately, all of the characteristics of a Ponzi scheme are in this one. Here are the five characteristics of a Ponzi scheme:

1. Charming, manipulative leaders/promoters skilled at extracting money from investors.  Investors noted that Mr. Brost was “very smart and could rattle off information on a wide variety of financial subjects.” He was successful in keeping his investors away from the regulators and the police by continuing to promise his investors that this was a legitimate project.
2. High Returns. In the case of Alberta, the offer was for 35 – 40% returns – way higher than what markets and banks can provide.
3. Pyramid/Affinity characteristics. In order for a Ponzi scheme to be successful, it must continue to bring in new investors.  Sometimes there are financial incentives to encourage investors to bring in people and often that means friends and family. The result can be devastating because friends and family also lose their money, and can ultimately blame the person who recommended it to them.
4. Promises of tax-free or tax advantages. Clearly this is attractive to many people because it implies you can avoid paying taxes.  As we all know, you can defer paying taxes, but you cannot avoid paying taxes altogether!
5. Confidentiality. As was the case of the Manna Ponzi scheme, described in a previous blog post, investors are encouraged, sometimes even made, to sign non-disclosure agreements. 

Share this blog with your friends. If anyone knows of a suspicious investment scheme, the first thing to do is report it. Sadly, we find out about these schemes when it is too late and all of the money is gone.  Reporting early can result in disruption or stopping the scheme altogether.

There is no such thing folks! We at the BCSC get very frustrated when we see so many cases where people fall for this promise.

Recently we settled with two individuals who admitted to contravening various securities laws when they solicited funds for a failed investment scheme that raised about $9.6 million from 863 investors. Get this. These investors were told that their funds would be used to buy and sell distressed merchandise, and that they could expect between 100 per cent (their initial investment) and 300 per cent return within 90 days. 

That is a huge red flag. 100 per cent return – not possible in a legitimate investment. How do we get the message through to people that these types of promises could lead to losing all of their investment?

With all of the media attention to the Madoff case (promised up to 46% annually) in the US, surely people will become more cautious, checking to see if their advisor is registered and getting a second opinion of promised returns that are suspiciously high. Earl Jones allegedly promised higher returns than the bank.

Have you seen any examples of promises too good to be true? If so please report them to the BCSC’s Inquiries.

Every fall we hold a half-day conference, Capital Ideas, for the securities industry and interested members of the public. CBC news anchor Ian Hanomansing moderates the panel and handles questions from the audience. Last year we tried to get into the minds of the 21st century investor. We spent the morning with business leaders and investors analysing original research on the challenges facing investors today.

The year before we brought together a group of business leaders and enforcement professionals to discuss securities enforcement – one of the key tools that regulators have to protect Canadian investors.

This year we are bringing to Vancouver a distinguished panel of experts, including the head of the International Organization of Securities Commissions (IOSCO) and Doug Hyndman, who leads the transition office for Canada’s proposed national securities regulator. Capital Ideas 2009 will focus on how regulators should respond to the international credit market crisis and its fallout on the broader capital markets.

We picked this year’s topic because we think it is important for everyone in the industry to understand what happened during last year’s credit crunch in order to prevent it from happening again. The panel will bring a wealth of knowledge and experience to a range of topics -- from how better to manage systemic risk globally and locally, to the challenges of advising today’s conservative, risk-adverse investors.

If you are interested in registering for the conference go to our website. There are a limited number of seats available at a reduced rate of $50.00 for students. 

Call Dawn Barden at 604 899-6677 to purchase seats at this reduced rate.

What next.  Here is a horrible example of just how clever a con artist can be. Defrauding women through an internet dating service. This isn’t the first time we have heard of such tactics.

Just imagine. You are single and looking for a suitable mate. The woman used an online dating site, plentyoffish.com. The next thing you know, you have been convinced by a potential partner to part with some or all of your savings. In this case, the person portrayed himself as a labour lawyer who had connections in the Canada Revenue Agency that could help resolve a tax issue involving the woman’s business.

It could just as easily been someone claiming to be an advisor offering an investment opportunity – usually one claiming to have high returns with little or no risk.

What’s the lesson here? Well, it means that career con people will find any avenue to prey on individuals and steal money from them.  Just when you least expect it.

What should you do?  Before writing the cheque on a potential investment opportunity, see if he or she is a registered investment advisor. Check to see if he/she is on the disciplined persons list. Google their name to see if there is any prior history that makes you suspicious.

Get a second opinion.

If you are remotely suspicious, contact BCSC Inquiries report it.
 

It’s back to school, as thousands of students begin another year of studies. Here in BC, our high school students are one step ahead of the rest of Canada. Why? Because five years ago, the BC Ministry of Education introduced a course teaching financial life skills for its new Planning 10 program.

To support the program, we took the initiative to design a comprehensive teacher resource called The City: Financial Life Skills for Planning 10. Working with teachers, students, curriculum writers and financial experts across the province, we quickly discovered that one of the biggest challenges was how to make financial education interesting and relevant to 14 and 15 year olds.

The result is an interactive, activity-based resource using eight fictional lifestage characters whose stories represented a wide range of financial experiences. As part of our program, we provide free webinar training to teachers, usually twice a year. This is an important component because we know that many teachers find the subject matter quite daunting to teach.

Last year, the Canadian government identified financial literacy for Canadian youth as a priority. To support this important goal, we agreed to license The City to the Financial Consumer Agency of Canada so that an on-line, interactive program in English and French could be made available to all Canadians.

So if your children are starting Grade 10, tell them about this program. Explain to them how important it is to learn how to manage money. Tell them it is an important life skill, as important as learning Math, English or History. 

Understanding important financial concepts like budgeting and saving, credit and debt, insurance, taxes and investing will arm students with the basic tools they need to navigate through the financial realities of adulthood.

It is always important to examine fraud schemes to find out just how they successfully entice so many investors into a loosing proposition. Here’s another significant aspect of the Manna ponzi scheme that is worth knowing about.

We always tell people in our InvestRight seminars that any promise of high returns with low or no risk is a false promise. There is no such thing. 

Lesson #3 In this case, Manna convinced investors to loan it money by promising significant monthly returns. Manna told them that their funds would be placed with experienced traders who had a long history of producing double-digit monthly returns through foreign currency trading.  Manna said it had an "annualized trading history of profit returns not less than 20% per month (240% a year)." Because of these high returns, Manna would pay consistently high returns back to its investors, as high as 125.5% per year.

The promise was 7% monthly returns, later reduced to 5%!

At the Manna hearing, the BC Securities Commission asked Dr. Peter Klein, an expert in international banking and trading, to give an opinion about the promised returns. His testimony reviewed the principles of financial theory and empirical studies. Dr. Klein concluded that it was simply impossible to generate returns of 5%, month after month, through any legal trading or investing in any financial markets.

So here’s the thing. All ponzi schemes offer high returns.  That’s how they extract money from investors. Obviously, people who fall for these schemes don’t do their homework to see if the size of returns being offered is actually possible. And here’s another piece of information for you: returns are never consistent month after month.  That was one of the red flags in the Bernie Madoff case.  The markets fluctuate, up and down. 

So watch out for excessively high returns promised consistently month over month. If that’s the promise, then mark my words, it is a scam.