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Fraud Awareness Month begins amid criticism of lax enforcement against serial scammers

by Greg Klein | March 7, 2018

Education more than deterrence seems to be the focus of Canadian securities commissions as Fraud Awareness Month begins. Two series of articles by Postmedia and the Globe and Mail reveal numerous examples of con artists evading administrative penalties and criminal charges, leaving victims powerless to recover losses.

Fraud Awareness Month begins amid criticism of lax enforcement against serial scammers

The British Columbia Securities Commission kicked off the annual awareness campaign by releasing results of a survey. The people most susceptible to investment scams, the poll found, are millennials. Over 500 respondents were tested on their reaction to a fictional investment offer that guaranteed no-risk returns of 14% to 25%.

“Although the claim contains several investment fraud warning signs, 26% of respondents said the offer was ‘worth looking into,’” the BCSC reported. “More troubling, 20% of the respondents who would look into the offer said they were interested because they need the money, indicating even greater vulnerability.”

Adults aged 18 to 34 showed the greatest naiveté, with 47% of women and 35% of men that age expressing interest. Just 13% of people 55 years and over gave similar answers, a decline from 26% in a similar 2012 study.

“Investors should always be skeptical of anyone offering a risk-free investment with an unusually high return, because there’s no such thing,” warned BCSC director of communications and education Pamela McDonald. “We encourage investors to look carefully at every investment they make, but also to listen to your gut. If something doesn’t make sense, or doesn’t feel right, we encourage you to contact the BCSC.”

The admonition follows criticism of weak enforcement by the BCSC and its counterparts. In December the Globe and Mail’s Grant Robertson and Tom Cardoso reported their analysis of 30 years of regulatory records, finding one in nine people pronounced guilty of securities fraud go on to re-offend, some even defying multiple lifetime trading bans through aliases and “jurisdiction-hopping.” Ill-gotten gains can far exceed penalties, which at any rate often remain unenforced.

In November a Postmedia series by Gordon Hoekstra reported numerous cases of uncollected BCSC fines and payback orders on scammers who in some cases continue to hold significant assets. Others transfer assets with relative ease.

Between the fiscal years ending in 2008 and 2017, Hoekstra stated, the BCSC collected less than 2% of $510 million in fines and payback orders. The Ontario Securities Commission did somewhat better, collecting 18% over the last decade.

In a December response to the Globe and Mail, the Canadian Securities Administrators stated that securities commissions are limited to pursuing administrative cases, with police responsible for criminal matters. But last month Hoekstra reported examples of Vancouver police and RCMP refusing to investigate fraud allegations. Vancouver cops say they typically refer cases of investment fraud to the BCSC. The RCMP declined to investigate another example on the grounds that it was a BCSC matter.

In another February story, Hoekstra revealed the BCSC “quietly” stayed more than $35 million of penalties regarding nine cases following a B.C. Court of Appeal decision on a pump-and-dump operation.

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