Alberta Securities Commission warns of top 5 investor risks of 2017

The Alberta Securities Commission has issued its annual list of investor risks for 2017. File / Global News

The Alberta Securities Commission is warning investors to be wary of scams — especially those based on high-profile news stories.

The commission has issued its annual list of investor risks for 2017.

Alison Trollope, with the commission, says a number of dubious companies try attracting investors by making claims based on the state of the economy, an epidemic or a natural disaster.

She says a number of companies claimed to be close to developing a Zika virus vaccine while the 2011 Japan nuclear accident spawned another false claim about the next generation of radiation detectors.

READ MORE: Watch for investment scams targeting baby boomers: commission

Trollope says the companies are often thinly traded, have little revenue and no hope of fulfilling promises.

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She says they’re known as pump and dump scams where stock shares are artificially inflated and the scammers sell their shares before the value craters.

“Making a decision to invest without doing any research is like playing with fire, you’re going to get burned ,” Trollope said. “No matter how great an investment opportunity sounds, be sure to take time to do independent research before making a decision to invest.”

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READ MORE: Economic downturn in Alberta prompts increase in online job scams

Here are the top five investor risks for 2017, according to the commission:

Unregistered sources

While there are some exceptions, anyone selling securities or offering investment advice in Alberta must be registered. Investors can protect themselves by checking their source’s registration online.

Binary options scams

Binary options are bets on whether the value of an asset will increase or decrease in a fixed time frame. The Alberta Securities Commission said there are no registered binary options dealers in Alberta or Canada.

The commission said Albertans who fall victim to binary options scams lose, on average, more than $20,000.

Offshore investments

The commission warns of sending money to companies with “offices” in countries overseas, saying it is a red flag of investment fraud.

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“When investors send their money overseas and something goes wrong, it can be difficult or impossible to get the money back, and unfortunately regulators and agencies in Alberta can do little to help.”

Deceptive online advertising

Scam artists often use social media, text messages and online pop-up ads to promote their fraudulent opportunities, the commission warns. They may use pictures of celebrities to lure people in.

READ MORE: Text message fraud cost Canadians half a million dollars so far in 2016

Being lured by “the next big thing”

Scam artists often use an emerging industry to lure people in, as there is usually very little information on new companies.

“Use caution before buying into the hype,” the commission said. “Company shares in emerging industries can easily rise based on rumors, not viable information. Be aware that stocks in emerging industries are highly speculative.”

With files from Caley Ramsay, Global News. 

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