The British Columbia Securities Commission (BCSC) is warning people of possible affinity frauds when using social networking websites.

These frauds facilitate or advertise meetings related to investment products and seminars.

Websites, like Meetup.com and Craigslist.org, allow people to create groups around investing strategies or advertise seminars for new investment products. Fraudsters can take advantage of information sharing tools, which can be an environment ripe for affinity fraud.

“We are concerned scam artists are using social networking websites to lure people to meetings that may promote fraudulent or unsuitable investment products,” says BCSC executive director Brenda Leong. “Investors need to do their own research before making an investment and should not simply rely on ‘expert’ advice given at a seminar or meeting.”

Communication tools provided by some social networking websites make it easy to advertise and promote investment scams to a wide audience for free.

“People need to be cautious when acting on or passing investment information to others. Victims of affinity frauds are often family, friends or community members who tell each other about the fictitious investment scheme,” says Leong. “Fraudsters can exploit social networking websites to reach people’s contacts that may include past friends, associates or even people they’ve met randomly over time, and create a larger network of potential victims.”

BCSC says to watch out for the promise of high returns, secrecy or the implications of an insider opportunity, the use of structures to avoid taxes and a lack of receipts or documentation about the investment.

Leong suggests visiting the business offices to ensure they exist, and checking to see if the sellers are registered to sell securities. If so, a regulatory history check will reveal any past financial troubles.

BCSC research shows that few people are reporting investment fraud to the proper authorities, according to Leong. “The BCSC is urging people to report suspicious activity. This information can help us act more quickly to disrupt and stop the activity, and prevent investors from being victimized.”