The protection of investors is the motivation behind many laws related to securities and investment opportunities. While many investors are savvy and well-educated about the products available, there are certain instances where some may not have a complete understanding of the complex legalities governing securities.
If you work in trading or advising in Toronto or the surrounding areas, it would benefit you to know that law enforcement and Canadian Securities Administrators zealously investigate allegations of misconduct against investors. The penalties are high and a conviction for wrongdoing, or oftentimes just the allegations alone, could affect many areas of your personal and professional life. Avoiding common methods of deception is advisable, and seeking immediate legal assistance if you are ever the subject of an investigation could be critical to your future best interests.
Ponzi schemes are just the beginning
Selling securities or advising potential investors requires registration with your local jurisdiction. Failing to register or to comply with the appropriate regulations is a serious offence. There are many other types of misconduct for which an advisor or trader may face accusations.
Most people involved in the world of investments understand the concept of a Ponzi scheme. Named for Charles Ponzi, an international fraudster, the scheme promises clients huge profits on their investments. However, those profits simply come from the money subsequent investors pay into the scheme. Because there is no real investment, such a plan cannot sustain itself, and perpetrators of Ponzi or Pyramid schemes often attempt to escape with the money investors pay in.
What other deceptive practices could result in charges?
The attraction into investment opportunities such as Ponzi schemes is the promise of fast, high returns for relatively small input. Many of your clients may be seeking this kind of profit, whether from legitimate or illegal ventures. In attempting to fulfill this wish, some of the ways in which traders can get into trouble include the following:
- Insider trading: Using privileged information that is not available to the public to persuade your client to invest in certain securities
- Market manipulation: Intentionally interfering with the price of a company’s shares through artificial manipulation, such as false news stories
- Affinity fraud: Taking advantage of the trust of members of a particular group, such as a church or ethnic community, to create investors
- Boiler room tactics: Using high-pressure or misleading sales pitches, usually by cold calling
The CSA and law enforcement may spend many months investigating allegations of investment or securities fraud. If you learn that you are the subject of such an investigation, you may have been a target for a considerable length of time. This may mean investigators have already gathered substantial evidence, and you would certainly benefit from the assistance of a legal professional who could help determine your best strategy for moving forward and fighting the charges against you.