Madoff’s sentencing was still making headlines when the latest investment scheme hit Canadian headlines. Quebec businessman Earl Jones disappeared, along with as much as $50 million of his clients’ money, in an alleged Ponzi scheme.
(Read the Globe and Mail article: Dozens fall victim to apparent scheme.)
The Jones case displays some very real and disturbing characteristics of investment fraud, primarily:
1. You don’t have to be rich to be a target of fraud.
According to reports, while some of Jones’ alleged victims lost hundreds of thousands of dollars, others had invested much less – as little as a few hundred dollars.
2. Fraud is often carried out by someone you know and trust.
Jones was well known to his victims: a hockey coach, a longtime friend. He gained their trust, and then became their financial adviser. It didn’t occur to anyone to check the credentials of someone they knew so well. Had they looked further, they would have seen that Jones was not registered to trade in securities.
Jones’ clients were not limited to Quebec, they ranged from coast to coast, including Nova Scotia.
Anyone who believes they were victimized by Jones (or anyone else) should contact their local securities administrator. For more information, read how to report a suspected scam.
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An estimated 72,000 Canadians were victims of investment fraud in 2007.
Atlantic Canadians are more likely than the average Canadian to be approached with a fraudulent investment, according to research conducted by the Canadian Securities Administrators in 2006. Atlantic Canadians are also much less likely to believe that investment fraud is a problem in their province.
Nova Scotians have a reputation for friendliness and hospitality. Does this put us at increased risk for fraud? Are we simply too trusting? Perhaps there are times when we should worry less about being rude and just close the door, hang up the phone, or delete the email.
Many of us rely heavily on the recommendations of advisers, family and friends when it comes to our investment decisions. If the people we put our trust in are not acting in our best interest, this can have disastrous consequences for our finances. Who would you prefer handling your future – someone with your best interest in mind, or their own?
The key to avoiding investment fraud is to deal with a registered and reputable adviser. Anyone selling securities (investments) in Nova Scotia is required to be registered with the Nova Scotia Securities Commission (unless they qualify for an exemption, which you can verify by contacting the commission). Firms and individuals can only register with the commission if they are properly qualified.
How do you find YOUR adviser?
Ask for referrals from friends, family or work associates, but never assume that who’s right for them is right for you. Make a list of potential candidates. Call them, and screen over the telephone. Ask potential advisers for references who you can follow up with.
You can check an adviser’s registration with the Nova Scotia Securities Commission. You can also search our enforcement proceedings online, for any past litigation. The Better Business Bureau can tell you if they have a history of complaints against an adviser.
Choose an adviser who has the necessary qualifications and experience, who is registered with your local securities regulator and who you believe is trustworthy. Just as important is choosing someone you are comfortable with. Trust your judgment about whether a candidate will listen to and answer your questions.
Don’t be afraid to make a change if it becomes clear your first choice was not the right one or if your needs change. Account transfer fees can often be waived, and in any case are a small price to pay for peace of mind.
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