Boiler room scams

Investment scams are often pulled off by a team of people who set up a makeshift office, called a “boiler room”.

InvestmentInvestment An item of value you buy to get income or to grow in value.+ read full definition scams are often pulled off by a team of people who set up a makeshift office, called a “boiler room”.  To convince you their company is real, they might send you to the company’s website, which looks very professional.  They might also set up a toll-free number and a respectable address to make the company seem legitimate.

Fraudsters will often “cold call” people by telephone.  They may use high pressure sales tactics to encourage you to investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition in a private company that is about to be listed on a major stock exchangeStock exchange A market in which securities are bought and sold.+ read full definition.  They use false or misleading information and try to convince you that now is the best time to invest because the company is about to “go public” and you can make a lot of money if you get in now.

In some cases, the securities they are selling may seem “real” because they say that the companies are selling them outside typical channels where most retail investors buy investments such as banks or investment firms.

In either case mentioned above, a fraudster calling from a boiler room, will be calling you about a fake company.  By the time you realize the company doesn’t exist, you will have lost your money. If you call back, shortly after you have given them money, and try to back out of the transactionTransaction The process where one person or party buys goods or services from another for money. Examples include taking money out of an account, buying something with a credit card or taking out a loan.+ read full definition, they may bully you and convince you why you should keep your “investment”.  Of course, you may not be able to contact them again at all. The fraudster will close shop and you won’t be able to reach them.

Typically, the salespeople calling you from a boiler room are not qualified to work in the securities industry in Canada.  They can be very convincing, and often times, good actors. They might try to tell you that they are licensedLicensed An advisor or firm that has met the standards set by the insurance industry. Regulated by the Financial Services Commission of Ontario (FSCO).+ read full definition in other countries or try to impress you with the wealth they say they have attained themselves.  They may also shareShare A piece of ownership in a company. A share does not give you direct control over the company’s daily operations. But it does let you get a share of profits if the company pays dividends.+ read full definition your phone number with other fraudsters.   This may cause you to be on a list and susceptible to another scamScam When someone tries to make money by misleading or tricking another person.+ read full definition called “double-dip”, where you are targeted by a second fraudster. The second fraudster may even claim to help you recover your money from the first fraud if you pay them a fee, but this is a scam as well.

How to avoid falling victim to a boiler room scam

1. Check before you invest

One of the best ways to avoid investment fraud is to make sure that any person offering you an investment or investing advice is registered to do so. In general, anyone selling securities or offering investment advice must be registered with their local securities regulatorSecurities regulator A government agency that enforces the securities act in jurisdiction it has authority over. This act is made up of laws that establish rules for issuing and trading securities. The Ontario Securities Commission is the securities regulator for Ontario.+ read full definition. Checking registrationRegistration A requirement for any person or company trading investments or providing advice in Canada. Securities industry professionals are required to register with the securities regulator in each province or territory where they do business.+ read full definition is quick and easy, visit CheckBeforeYouInvest.ca for more information.

2. Get a second opinion

Be skeptical of unsolicited investment opportunities that you might receive over the phone, online or from acquaintances. Before you invest, call the Ontario Securities Commission or get a second opinion from someone you’ve confirmed is a registered advisor. You may also want to consult a lawyer or an accountant.

3. Take the time you need

Be suspicious of limited-time offers and high-pressure salespeople. You should never feel pressured to buy an investment on the spot. Take the time you need to make an informed decision.

4. Research the investment

Before you make any investment, understand how it works and the risks and fees associated with it. Don’t be afraid to ask questions and make sure that it fits with your financial goals.

5. Report investment fraud

Victims often don’t report investment fraud for fear of embarrassment. Not reporting what happened, can leave others vulnerable to the same scam.

How to report fraud

If you suspect that you have been approached by a fraudster or that you may have been a victim of a scam, please contact us immediately.

Key point

If you suspect that you have been approached by a fraudster or that you may have been a victim of a scam, contact the Ontario Securities Commission.

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