International Law

Regulators are not your Advisors

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Geoff Kirbyson, writing at the Winnipeg Free Press, about a fraud conference held in Winnipeg writes:

"Garry Schmidt, associate manager of special investigations at Great-West Life Assurance, agreed.

He said the public often considers fraud as a victimless crime because nobody was shot, stabbed or suffered a bodily injury when their assets were taken.

He said fraud victims are often taken advantage of after developing a level of trust with unsavory types, who usually have an intimate knowledge of their financial situation.

He said it's up to consumers to do their homework to reduce the chance they'll be victimized.

Investors have to be particularly diligent, he said, when approached by financial salespeople offering opportunities that appear too good to be true.

He said they should call the securities commission and the Better Business Bureau to determine if they're legitimate."

Mr. Schmidt may be a wonderful special investigator at Great-West Life Assurance, but he is giving people very bad advice.

First, the Better Business Bureau is a consumer complaint organization.  It helps mend relations between its members and consumers who have complained.  The BBB has no independent fraud department.  Many times a fraudulant business opportunity seller will join the BBB to obtain the apparent authority of the BBB. Since the fraud will be in place for only a year or less, the BBB will have no complaints on file until the scammers have folded their tents and left the premises.

Second, contacting the securities commission is equally irrelevant.  No securities commisssion is going to give you personal advice about the legitimacy of an offering.  In fact in Canada, it is extremely difficult to tell which of the many self regulating organizations that you should call.

Finally, no opportunity is too good to be true, until you find out afterwards that it was too good to be true.  The run-up in, say Google's stock from the IPO to its height, could have looked to good to be true.  It wasn't.  Some are and some aren't.  What you are really interested in is whether a scheme promises something for nothing - that is a reliable sign of fraud.

Full post as published by Misleading Advertising Law on March 18, 2009 (boomark / email).