Check registration of people trying to sell you investments

CSA/ACVM

Canadian Securities
Administrators

Autorités canadiennes
en valeurs mobilières

Check registration of people trying to sell you investments

Each year, con men swindle thousands of Canadians out of their savings by convincing them to put money into bogus investment schemes.

These financial predators rely on gaining a person's trust in order to clean out their bank accounts. But a simple phone call to your provincial or territorial securities commission can help protect you and your savings.

"Before entering into any kind of contract with someone trying to sell you an investment, check with your local securities regulator to see if that person is registered and licensed," said Doug Hyndman, chair of the Canadian Securities Administrators, an umbrella organization of Canada’s 13 provincial and territorial securities regulators.

Except in limited circumstances, anyone selling or providing advice on investments must be registered regardless of the title with their provincial or territorial securities regulator. These salespeople may use many different titles such as investment adviser, broker, registered representative, mutual fund salesperson, financial consultant or financial planner.

All registered individuals must meet certain minimum educational qualifications. However, some have more qualifications and are authorized to sell a wider range of investment products than others. Investors should ask questions about their adviser's qualifications as well as asking about the investments they are selling.

Investors shouldn't let their adviser sell them products they don't understand, Hyndman stressed.

"Ask your adviser why they recommend particular funds or securities. Ask how much the salesperson is earning in commissions. Do they have an ulterior motive for selling a particular product? Know exactly what you are paying for," Hyndman said

Investors can contact their provincial or territorial securities regulator to see if their adviser is registered. If the person selling you an investment isn't listed, it likely means they aren't registered and that should raise an immediate red flag.

"Investors are trusting these people with their money. They have a right to demand integrity and honesty, as well as knowledge, experience and good service," Hyndman added.

Investigate before you invest - know who's selling you investments

Don't be afraid to ask questions. Don't invest in anything you don't understand.

Make notes of all conversations with your adviser. Your provincial or territorial securities regulator can provide you with a free Investor Education kit that provides a checklist for recording conversations with your adviser. These notes could help protect you if something goes wrong.

Be wary of certain types of behaviour or sales pitches. Legitimate and qualified advisers don't need to rely on the "hard sell" or "hot tips" to retain clients.

An adviser should not try to pressure you into an investment decision. If they do, walk out of the room or hang up the phone. No reputable adviser would engage in high-pressure sales tactics.

Be skeptical if someone tells you there's no written information about the investment. When someone uses that line, it's a sure sign there's something about the investment they don't want you to know.

Be wary if you're told of an opportunity to earn uncommonly high returns. High returns usually mean high risk.

Ask the person recommending the investment if they have a personal interest in the sale. The product may not be suitable for you and they may be promoting it because they earn higher commissions on that product.

Try to do as much research as possible. Don't rely on a person's word or a so-called "hot tip." Every investment should stand up to hard rational scrutiny.

For more information, contact your local securities regulator at (regional contact information to be added by CCNA).