The British Columbia Securities Commission and the Manitoba Securities Commission want people to be aware of questionable investments that advise people to withdraw funds from their registered retirement savings plans and reinvest in unrelated securities.

Generally, these “unlocking” schemes involve investing in the shares or units of a public or private company (sometimes through a private placement that the company sells to investors by way of an offering memorandum) or debt instruments of some kind, such as bonds, promissory notes and mortgages. However, the common feature of all of these schemes is the promise that investors can immediately access a portion of the cash value of your RRSP, RRIF, LIRA, LRSP, or other locked-in retirement savings or income plan without paying taxes.

In addition, these schemes sometimes promise excellent returns on the remaining investment or significant tax benefits.

Promoters, or their agents, may advise investors to move their retirement funds into a self-directed account, in order to conceal the unlocking transfer from their financial institutions or advisors. Once the funds are transferred, the promoter provides investors with instructions on what to buy.

“Individuals or companies that promote these investment schemes package them in a variety of ways, but, in the end, they all have the same effect — you suffer significant investment losses, on top of serious tax and pension repercussions,” the regulators warn.

Common characteristics of unlocking schemes

According to the BCSC and MSC, these types of schemes often have one or all of these characteristics:

• offers of debt reduction through new sources of income (i.e., dividends, interest payments, etc.);

• promises of immediate access to assets in locked-in RRSPs or RRIFs;

• unrealistic returns on an investment, or frequent high interest or dividend payments; or

• aggressive advertising campaigns or promotional meetings that talk about investments that will help you unlock your locked-in retirement savings.

Investors that have been approached or know of an investment that fits the description above, are urged to contact their provincial securities regulator.

IE