As part of their efforts on behalf of Fraud Prevention Month, Canadian securities regulators are reminding investors to check registration as a basic first step in preventing investment fraud.
The Canadian Securities Administrators (CSA) are calling on investors to participate in Check Registration Day on March 26, by using the national registration search tool on the CSA website, or contacting their local securities commission to verify registration.
It notes that its latest investor survey found that 60% of respondents that say they have a financial advisor have never completed any form of background check. And, as almost 30% of Canadians believe they have been approached with an investment fraud at some point, with 4.6% believing they have been a victim of investment fraud, the CSA stresses that investors need to be careful about who the deal with when it comes to investing.
“Checking registration is an essential part of any investor’s due diligence,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC). “To protect their investment, we encourage all Canadians to check the registration of any individual or firm offering an investment opportunity.”
The CSA says that its national registration search tool is quick and easy to use. And, it notes that, in terms of investor protection, “registration status or category is more important than a title, because either one tells the investor what types of products or services a firm or individual is qualified to sell or provide advice on.”
However, investor advocates have called on regulators to do more to help investors prevent fraud and avoid losses by making background checks easier and more comprehensive. Late last year, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) called on regulators to develop a more consumer-friendly registration check.
“Securities regulators tell investors to check the registration of anyone selling investments and to only deal with registered representatives. However, we do not think that regulators appreciate the difficulty consumers encounter in conducting a proper registration check,” it said, noting that the current system is too complicated, necessitates the search of several databases, and requires the consumer to know the registered name of the firm (which may be different from the business name).
As a result, FAIR called for regulators to “provide a single, national comprehensive background check that Canadians can easily use to check the background, registration status, proficiency and disciplinary history of registrants. The system should also include self-regulatory organization membership information.”