A Canadian Strategy to Combat Investment Fraud

Author

Fondation pour l’avancement des droits des investisseurs (FAIR)

Organization

Canadian Foundation for Advancement of Investor Rights (FAIR)

Published

2014

Summary

The purpose of this report is to identify and analyze the types of investment fraud that are perpetrated in Canada in order to identify strengths and weaknesses of the Canadian regulatory system and to identify potential improvements to the current system.

In examining investment fraud in Canada, the definition of investment fraud was limited to fraud involving securities that directly affect individual retail investors. These include Ponzi schemes, pump and dumps, forex scams, real estate investment scams and other related schemes such as affinity fraud, boiler rooms, advance fee scams, and internet fraud.

Canada does not have a framework in place to collect, track and report on investment fraud complaints and aggregate that information at a national level. Those responsible for dealing with investment fraud in Canada publish only limited information relating to complaints; securities regulators publish varying amounts of information while there do not appear to have been any publications in recent years by police agencies. This is problematic, as investors have been found to have a low awareness of securities regulators, and appear to be more likely to report investment fraud to police agencies. As a result, it is likely that only a small portion of actual complaints are accounted for in publically-available reports. Further, reporting rates have generally been found to be extremely low, so the number of complaints received would likely only be the tip of the iceberg in measuring the prevalence of investment fraud in Canada.

In conclusion, the disparate system for combating investment fraud in Canada makes it difficult to evaluate the efficacy of the current system. The results of our research did not provide comfort that the Canadian system responsible for protecting investors against investment fraud is robust. We hope this research encourages the entities in Canada who are responsible for combating investment fraud to consider the issues raised and work together to improve the system to better protect the Canadian investing public from fraud.

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OCA Funded Research
This research received funding support through the Office of Consumer Affairs' Contributions Program.

Contact information

Source: Consumer Policy Research Database