$ NEED MONEY $
Do you have a locked in pension plan
from an ex-employer (LIRA) or (LIF)?
3 easy ways to help.
Call 1-866-XXX-XXXX
A suspicious advertisement similar to the one above has been circulating Atlantic Canada regarding locked-in Registered Retirement Savings Plans (RRSP) such as Locked-In Retirement Accounts (LIRA) and Life Income Funds (LIF).
The ad offers to help persons in need of money to access funds from locked-in pension plans with ex-employers. To do so, investors must pay fees and qualify for loans. Unfortunately, rather than providing funds as promised, the persons behind the ad could be taking investors’ money and disappearing, leaving previously cash strapped persons in an even worse financial situation.
The unlocking of RRSP and pension funds is strictly regulated provincially under the Pension Benefits Act and federally by the Canada Revenue Agency. Before responding to advertisements offering to assist with obtaining funds from locked-in RRSPs, investors are cautioned to first seek professional advice, perhaps from a lawyer or accountant, or the Canada Revenue Agency in order to ensure the offer is legitimate.
Also, if you have questions about an investment that seems fishy, you can also contact the Nova Scotia Securities Commission.
March is Fraud Prevention Month – remember to always check before you invest.
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As noted elsewhere on this site, a recent survey* found that 41 per cent of Nova Scotians believe they have been approached with some form of investment fraud. What else do we know about investment fraud in Nova Scotia? You might be surprised.
- Of those approached with investment fraud, 25% say they have been approached five or more times.
- Only 29% believe investment fraud is common in their province.
- Only half of Nova Scotians believe they are as likely to be a victim of fraud as anyone else.
- 81% believe it is important to report even the suspicion that someone has approached them with an investment fraud.
- Less than 1/3 of those approached actually reported the attempt.
- 81% believe you should never make an investment without doing independent research. Yet almost half (48%) rely completely on the advice of an adviser, doing no research on their own.
- You do not need to be rich to be a fraud victim - most Nova Scotians are defrauded for $5000 or less, often less than $1000.
*All stats taken from the CSA Investor Index 2009.
Want to learn more about Investment fraud - play our Go Fraud Free ~ Win a Wii contest. Enter by commenting on any of our blog posts, or answering our daily trivia questions on Twitter.
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It’s the end of February: have you contributed to your RRSP yet? The March 1 RRSP contribution deadline is looming, and if you haven’t contributed yet, you may be beginning to panic. How much do I contribute? And what to invest it in?
Before making a rash decision, remember that most important thing is that you get your money into an RRSP account. There is no rule that says you have to invest it upon deposit. Don’t force yourself into a quick decision, and buy something you aren’t comfortable with or don’t understand.
Check your notice of assessment from last year’s tax records, to be sure you know how much room you have to contribute. The last thing you need is to over contribute and start dealing with penalties. If you have time, talk to an accountant or financial adviser about how much you should contribute. If your optimal contribution isn’t possible, contribute as much as you can afford, without straining your day to day budget.
If you already have an RRSP account open from a previous year, you might be able to quickly and easily deposit cash right into your RRSP account via online banking, saving you the time and hassle required to set up an appointment.
Once the cash has been deposited, contact your adviser and schedule a meeting in the coming weeks, to decide when and how to invest. Working at a relaxed pace allows you to consider all options and make a choice that suits your needs and your risk tolerance.
Also, another point to remember: if you are strapped for cash this year, but still want to contribute to an RRSP, you can transfer other investments into an RRSP account – provided they are eligible.
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Dick* works for a small technology company on Canada’s East Coast. He is a programmer, and spends much of his time working from home.
One day while reporting for a team meeting, he was surprised to find the office a-buzz with rumours about a possible corporate takeover. It was all still a secret he was told, but a major international technology firm was apparently in negotiations with their board of directors. Everyone was wondering what it would mean locally: more investment and more jobs, or perhaps the opposite - cut backs and layoffs?
That evening over dinner, Dick discussed the situation with his sister Jane. While they decided things must be looking up if there was to be a takeover, and he needn’t worry about his job, Jane did bring up an interesting point.
“Don’t you earn stock options as a part of your compensation? I bet a takeover would drive the stock price up. You should buy now to take advantage of that.”
“Great idea, Jane,” said Dick. Why didn’t I think of that?”
The next day, Dick logged into his online account, and exercised his options, buying hundreds more shares in the company he worked for.
Six weeks later, the takeover was announced. Stock prices increased by about 40% in a few short weeks. Dick sold most of his shares to lock in a profit, and was quite excited. He even took Jane to dinner to celebrate their smart investing choices.
The next day, Dick was surprised to receive a call from the Securities Commission. They had questions about his recent account activity, and were investigating whether he acted on confidential insider information.
“I’m not an insider,” he thought. “I’m a programmer. Don’t those rules only apply to senior executives?”
What did Dick do wrong?
Securities laws prohibit a person in a special relationship with a reporting issuer from trading based on material information that is not available to the general public. By definition, an “insider” is someone in a position to know important, non-public information about a company, such as senior management.
However, anyone in an organization who becomes aware of such information, such as research and development teams or public relations staff, can be considered as a person in a special relationship with the organization, and is not allowed to trade on that information until it is available to the public. These rules keep markets fair for all investors, as everyone is making choices based on the same information.
Dick and Jane were not aware of the rules regarding insider information, but lack of knowledge does not protect them. It is important for anyone investing on their own behalf to know that they are governed by the same laws as professional traders. Ensure that you are aware of the rules in your jurisdiction.
A good resource to start with is the Rule Book of the Investment Industry Regulatory Organization of Canada (IIROC). Or, if you can handle the legal jargon, read the NS Securities Act.
You may also want to consider investing in more formal training - take a finance class at a university or community college, or sign up for the the Canadian Securities Course. It is a small investment for some valuable knowledge.
*Dick and Jane are fictional characters. The scenario however, is not that uncommon.
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