Watch for red flags

If there’s a silver lining attached to an alleged Ponzi scheme that victimized thousands of people in Alberta and beyond, it’s the heightened public awareness of investment fraud that’s resulted, says an official with the Alberta Securities Commission.

Darren Weeks speaks to an audience at the Red Deer Holiday Inn on Thursday during one of two investment presentations he conducted on behalf of his Fast Track Group.

If there’s a silver lining attached to an alleged Ponzi scheme that victimized thousands of people in Alberta and beyond, it’s the heightened public awareness of investment fraud that’s resulted, says an official with the Alberta Securities Commission.

Tamera Van Brunt, director of communications and investor education with the provincial regulator, said calls to the ASC’s public information line jumped 50 per cent after police announced they had charged Milowe Allen Brost of Chestermere and Gary Allen Sorensen of Calgary in connection with an investment scheme. Online traffic at the investor education section of the commission’s website spiked 500 per cent, she added, and views of the enforcement section where decisions and enforcement orders are listed were up 50 per cent.

Terry Nieth, the regional director with Investors Group Financial Services in Red Deer, said if people are now more cautious, that’s positive.

“I hope they are a little bit wary; I hope they are asking more and more questions and doing their due diligence.”

Darren Weeks, CEO of Fast Track Group — a St. Albert-based financial education and investment company — agreed during a visit to Red Deer last Thursday that the case has a very high profile.

“Everybody’s aware of it.”

Weeks agreed that the attention is a good thing if it encourages prospective investors to protect themselves.

“The financial IQ of Canadians is low because we don’t teach this in school,” he said. “That’s why these things continue to happen.”

Nieth concurred.

“I think a majority of the population does need some aid and guidance to do their financial planning for them, to help them.”

Retaining a certified financial planner, he said, is one good option.

Weeks also described some basic things people should do before investing. These include reading the related documents carefully, being wary of individuals or organizations with a “checkered past” and not succumbing to pressure to act quickly or before you’re ready.

Van Brunt also thinks it’s important to fully understand investments and be familiar with the people pitching them.

“You should know if the person offering you the investment opportunity is registered to sell the investment, what their background is, how they’re paid, what kinds of products they offer.”

People should also look in the mirror and assess their own risk tolerance, how much they can afford to lose and whether they need third-party guidance, said Van Brunt.

She offered a list of “red flags” that could signal a fraud. These include promises of a high return with minimal risk, pressure to invest quickly, offshore investments, and recommendations from friends or family who may not have done their homework.

Weeks went one step further, suggesting that complex, off-shore deals promising high returns should always be avoided. He cited the experiences of a veteran lawyer with knowledge in this area.

“He’s never, ever heard of an opportunity that’s off-shore, somewhat of a complicated structure, with returns of one per cent a week or 10 per cent a month — never once in 60 years has he heard of it working.”

Nieth offered a simple, time-honoured way to assess the validity of an investment opportunity.

“The old adage of, ‘If it looks too good to be true, it probably is.’

“It’s a competitive industry. If something’s way out of whack, there’s something wrong with it.”

He echoed the importance of doing careful research before pulling out your chequebook.

“Do some backgrounding on the company you plan to deal with — are they reputable, have they been around for a long time — just those simple questions.”

A second opinion might also be helpful, he said, particularly if it comes from a knowledgeable source like a certified financial planner.

If you are relying on the help of an adviser, ensure he or she is qualified, said Van Brunt.

“Don’t assume because somebody’s put that title behind their name that they are registered to do that,” she said, pointing out that a check can be made via the ASC website.

The Alberta Securities Commission also has a public information line, an online complaints form, accepts e-mail inquiries and has other resources for investors. Its website is located at albertasecurities.com.

hrichards@bprda.wpengine.com

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