Identify and detect frauds and scams
Check Your Advisor’s Registration
Never Lend Money to Your Advisor
Any advisor who advises or trades in securities such as mutual funds, stocks, and bonds must be registered with the relevant securities regulatory authority in the Province or Territory in which the advisor’s clients reside. You should check an advisor’s registration before you open an account and provide your personal information by using the National Registration Search Tool at www.aretheyregistered.ca. A person whose name does not appear in the search cannot trade or advise on securities, and you should not deal with such a person for these purposes.
You should never lend money to your advisor. Unacceptable loans include personal loans to the advisor and loans solicited by the advisor for personal business ventures. If an advisor ever asks you for a loan, or if you have lent money to an advisor in the past, you should report this fact to the advisor’s dealer immediately.
Safeguard Your Confidential and Personal Information
Avoid Solicitations by Phone and Email
Avoid High Pressure Sales Tactics
You should never provide confidential or personal information to someone over the phone unless you know the person you are dealing with. In particular, you should never deal with individuals who call you and use high pressure sales tactics and ask for information such as your name, date of birth, social insurance number or credit card number. Additionally, you should never provide confidential or personal information over unsecure email. Unsecure email can be intercepted by third parties or redirected to unknown individuals without your knowledge. A good practice to protect yourself when providing personal information to your advisor is to use secure methods such as by providing the information in-person at a business location, over the phone where you have initiated the call, or over a secure digital portal.
Receiving a telephone call or email from a person attempting to sell you an investment that you do not know is a red flag. When making an investment you should only deal with an advisor that you are familiar with, or a representative from a dealer where you already have an account or business relationship. Always check the registration of an individual before you open an account and invest. You can check whether a person is properly registered to trade in securities such as mutual funds, stocks, and bonds at www.aretheyregistered.ca. A person whose name does not appear in the search cannot trade or advise on securities, and you should not deal with such a person for these purposes.
Do not invest money if you feel that you are being pressured to invest. Fraudsters often use high-pressure sales tactics in order to coerce individuals into investing in their fraudulent products. One technique used to pressure individuals involves limiting the time that an investment is available for purchase. This creates pressure on a person to purchase and limits their ability to think things through and make a considered decision. A time-limited investment should be considered a red flag, especially if the time limit is very short. For example, if you are told that an opportunity to invest is only available for a few hours it is highly likely to be fraudulent.
Never Name Your Advisor as Your Power of Attorney or Executor
Never Pre-Sign Blank Forms
MFDA rules prohibited mutual fund advisors from acting upon any power of attorney or similar authorization. You should never name your mutual fund advisor as your power of attorney or an executor in your will because it is contrary to MFDA rules, and may put your advisor in an irreconcilable conflict of interest. When selecting a person to act under a power of attorney or as an executor, it is best to consult with a lawyer, notary or another professional who deals in estate matters.
You should never sign a blank form. When a blank form is signed it affects the integrity and reliability of documents and destroys necessary audit trails. Signing a blank form poses similar risks to signing a blank cheque, which is something most Canadians would never do. The MFDA has prosecuted cases where blank signed forms were used by advisors to commit fraud.
Investors who travel frequently or reside out-of-country for large portions of the year may be concerned about processing trades while away, but signing a blank form is not the solution. If you are concerned about processing trades while you are away, speak to your advisor about the proper procedure that can be used so that your advisor can accept your verbal instructions.