Ontario insurance regulators are sounding the alarm about the ongoing threat posed by Ponzi schemes.
The Financial Services Commission of Ontario (FSCO) issued an alert Wednesday warning that it continues to receive complaints from consumers who have lost money in Ponzi schemes.
FSCO says that Ponzi schemes often share common characteristics, and it lists some of those red flags, including: that both the sellers and the investments themselves aren’t registered; the promise of high investment returns with little or no risk; and, overly consistent returns.
It also warns investors to watch out for problems with paperwork. “Signs that funds are not being invested as promised include: an absence of or refusal to provide disclosure information, account statements that do not add up and statements that are not on company letterhead,” it says.
Similarly, it says investors should be very wary if they don’t receive a promised payment, or have difficulty cashing out of an investment. “Ponzi scheme promoters sometimes encourage participants to ‘roll over’ promised payments by offering even higher investment returns. Another warning sign is if your representative offers to cover the payment with a personal cheque,” it says.
FSCO says consumers considering investing in mortgage products should check if the mortgage brokerage, administrator, broker or agent, they are dealing with is licensed. It also stresses that all mortgage brokerages, brokers and agents in Ontario are required to disclose the material risks of any mortgage investment to investors in writing and in plain language.
“Investors should ensure they receive this disclosure and should carefully review it before making an investment or lending decision,” it says.