Investing is an excellent way to make your money work for you and to save for your future retirement. In fact, the Canadian Bankers Association publishes a free beginner’s guide entitled “Investing Your Dollars,” which is available on our website. It is important to protect your interests, however, and that includes educating yourself about investment risks, selecting your financial advisor carefully, diversifying your investments, and, very importantly, knowing how to recognize an investment scam when you see one.

Tips on Recognizing a Scam

The Investor Education Fund provides information on investing and managing your money and they also have some important tips on how to recognize an investment scam on their website Investored.ca.

• Know the source -- Ignore e-mails and telephone calls from people or companies you don’t know offering investments. If they don’t know anything about you, it’s against the law to offer you investments. Be careful: scam artists often use company names that are similar to well-known companies.
• Avoid hot tips and inside information -- Hot tips usually don’t work out. If someone says they have inside information, don’t trust them. Even if it is true, it would be illegal to use it. Also watch out for cheap or penny stocks. They are often manipulated to drive prices up. Then they crash and your stock is worthless.
• Take care in choosing your adviser -- There are different kinds of advisers offering different advice and products. Make sure that your adviser is registered to buy and sell the investments that interest you. If you take the time to find a good adviser who is right for you, you are much more likely to make good investment decisions.
• Learn more -- The more you know about investing, the easier it is to make good investment decisions. It will also be easier to spot anyone who is trying to give you bad advice. Don’t buy an investment that you don’t understand. Your chances of losing money are greater. Always get all the information you need. You’ll feel safer and more confident about your decisions.
• Be willing to say "no" -- Don’t feel you have to say "yes." Good advisers won’t try to pressure you. Only say "yes" when you know the person, understand the investment, and feel that it is right for you. If your instincts tell you "no," listen to them.
• Look at the future, not just the past -- Past performance of an investment is a sign of how it will do in the future. But some investments that do very well one year, or over a period of years, can do very poorly later on. Make your investment decisions based on the outlook for the future, not just on how an investment did in the past.

Other Resources

Each of the provincial securities commissions also publishes consumer information on investment frauds and scams and what to do if you have concerns. Take a look at the resources available in your province or territory:

• Alberta Securities Commission
• British Columbia Securities Commission
• Manitoba Securities Commission
• New Brunswick Securities Commission
• Securities Commission of Newfoundland and Labrador
• Northwest Territories: Department of Justice, Registrar of Securities
• Nova Scotia Securities Commission
• Nunavut: Department of Justice, Registrar of Securities
• Ontario Securities Commission
• Prince Edward Island Securities Office
• Commission des valeurs mobilières du Québec
• Saskatchewan Financial Services Commission
• Yukon Securities Office

Test Your Knowledge

Think you already have a good handle on recognizing investment fraud? The Investor Education Fund also publishes a quiz to test your knowledge. You can take the quiz here: http://www.investored.ca/Quizzes/Fraud/quiz_fraud.htm

For more fraud prevention tips, or to download the CBA’s free booklet, Safeguarding Your Money, visit the Fraud and Security section of the Canadian Bankers Association website.

Do you have an idea for a future fraud prevention tip? Send us an e-mail with your idea to FraudPreventionTips@cba.ca.

Canada's banks take the issue of privacy, security and fraud prevention very seriously. They work hard to prevent their operations and customers from being used for any kind of financial crime and to raise awareness about the ways that customers can protect themselves.

As a consumer, you also have an important role to play in preventing fraud. This month we’ll take a brief look at the topic of investment scams and fraud.