Mikestrathdee’s Blog


Investment Fraud part two
January 21, 2011, 9:53 pm
Filed under: Financial Management, Fraud, Investing | Tags:

published in Christian Week Ontario September 2009

Hardly a week went by this summer without allegations of another case of financial fraud making headlines.  Victims frequently will recover little, if any of their money.

As my last column indicated, Christians seem to be particularly vulnerable to fast talking promoters.

Even high-profile people who should know better have been snared by the promise of a quick buck.

Ron and Reynold Mainse stepped down from their positions with the 100 Huntley Street TV program this spring after news broke that they invested money with Gordon Driver, who is accused of running a $16 million investment fraud. Aside from whatever money they lost, if allegations they were paid to lure other investors are proven in court, their days of TV ministry are over.

Court documents suggest over 80 other Canadians, and 15 Americans invested with Mr. Driver, who told them his sophisticated trading program could generate weekly returns of one to five per cent. Anyone taking the time to think it through should have realized that those numbers don’t add up, given that the long term average annual return for North American stock markets is between eight and 10 per cent.

How do you avoid become the next victim? Here are a few tips.

–          Don’t ever release personal financial information over the phone or e-mail to someone you don’t know.

–          Don’t send money – often described as a processing or handling fee – to someone promising to give you a percentage of an offshore investment, inheritance, lottery or even offering a new job.

–          Don’t believe anyone who promises you a higher than average return on an investment that is described as being low or no risk. Greed can be costly.

–          Don’t be pressured into acting quickly.

–          Don’t think the courts will solve the problem. Police or government regulators usually can’t make things right in fraud situations.

–          Does the person trying to sell you the investment hold a CFP, CIM or CLU designation? Is the accreditation still valid?

–          Is the salesperson properly registered to sell stocks, mutual funds or insurance? In each case there is a regulatory body that you can check with. Don’t sign anything until you have checked it out.

–          Is the salesperson associated with a reputable firm that has a compliance department? Major banks, insurance and mutual fund firms

Even if you have heard good things about a particular advisor or product, you still need to do your own research. Get as much information as possible, preferably from sources other than the person who is trying to sell you the product.

Many of the people who try to sell you financial product earn most or their entire livelihood from trailer fees, commissions and bonuses that are directly related to what they sell.

That’s the way the system works. Investors need to understand the potential for conflict of interest.

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