Research before investing

Research before investing - RRSP investors cautioned to beware of fraudsters

By Patricia Bowles,

Director of Communications and Education,

BC Securities Commission

With RRSP season upon us, many people are trying to figure out where to put their money by the February 29 deadline.  This way, they can get a tax deduction and reduce their 2011 taxes. The ongoing uncertain economic environment can make that decision challenging. Historically low interest rates, lacklustre returns and protracted volatility in conventional markets have many people wondering where to put their money.

Unfortunately, the uncertainty of today’s economic climate presents another challenge for RRSP investors; it is also ideally suited to investment fraud. Fraud artists are good at sussing out their market. There are unlimited opportunities to target investors by promising quick, solid returns with little or no risk.

Before contributing to an RRSP or investing other money you may have, you need to do some research about the person you are dealing with. You can use several tools provided by Canadian securities regulators.

First, check whether the person you are dealing with is registered with a securities regulator in Canada. The Canadian Securities Administrators (CSA)  http://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850” 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 is not currently registered in B.C., call the BC Securities Commission’s Inquiries Line at 1-800-373-6393 (toll free).

Even if the person is registered, things can still go wrong.  Make sure your cheque is payable to the person’s firm, not to the individual or to their personal company.

Next, check out the CSA’s  http://www.securities-administrators.ca/disciplinedpersons.aspx?id=74  Disciplined Persons List, which contains information relating to persons that regulators in Canada have disciplined. You should type in the name of the individual you are considering investing with. If you find the name on the list, read what the violation and sanctions were.

If the person you are considering giving your money to was sanctioned for fraud, illegal distributions, or other significant violations, you would be wise to invest your money elsewhere.

In addition to checking the person you are dealing with, it is worth checking if the firm you are dealing with or the investment you are considering is on the BCSC Investment Caution List. Among other things, this list provides investors with the names of unregistered foreign brokerage firms and businesses outside BC that have unqualified investments.

The Investment Caution List does not identify all unregistered activity or unqualified securities being promoted in the province.

However, if the firm you are dealing with or the investment you are considering is on this list, you should call our Inquiries Group at the number above.

At this time of year, it can be difficult to resist an investment opportunity.

While the tax deduction for an RRSP contribution is nice, it is not worth handing your RRSP contribution to someone you haven’t checked out.  No amount of tax deduction is worth losing your money in an investment scam.