National Investment Fraud Vulnerability Report

Publication: British Columbia Securities Commission

Year: 2012

Tags: Fraud Surveys, Victim Profiling

Relevance: Studies that focus on factors of vulnerability to investment fraud help guide the creation of targeted and effective protection programs.

Summary: This online survey of over two thousand older (50+) Canadians examined the financial behaviors and vulnerabilities of investors to scams and frauds.  The impact of investment fraud was sizeable:

  • More than 3 in 20 Canadians 50+ have been victims of investment fraud in their lifetime (p. 7).
  • 1 in 5 respondents expressed interest in a “clearly fraudulent investment offer” (offering guaranteed 14-25% monthly returns and no risk) (p. 4).
  • Almost half (48%) of investment fraud victims lost over $5,000 on their most recent victimization.  11% lost $50,000 or more (p. 29).

Weighted responses (to reflect the national demographic profile) suggest that certain people are more vulnerable:

  • Compared to the overall reported interest in the clearly fraudulent offer (19%), those nearing retirement (aged 50-64) reported greater average interest (23%).
  • 24% of men indicated having been a victim of investment fraud, as compared to 11% of women (p. 28).
  • Those vulnerable to fraud appeals were more likely (50%) to be concerned about making ends meet financially  than those not vulnerable to the ploy (39%) (p. 32).
  • Active investors were more likely to have been a victim of investment fraud (29%) than passive investors (17%).

First Paragraph: The British Columbia Securities Commission (BCSC) engaged Innovative Research Group Inc. to benchmark fraud vulnerability among Canadians aged 50+ (“older Canadians”). Previous research tells us that anyone can fall victim to investment fraud. Much of it comes down to trust – the way in which fraudsters get to their victims. Young or old, rich or poor, financially literate or not, the power of trust transcends all barriers when it comes to the likelihood of falling victim to investment fraud. This study looks past trust and sets out to determine who is most vulnerable to fraudulent investment offers and what triggers would motivate someone to invest in one. A key goal of the study is to assess Canadians’ understanding of the relationship between risk and return. Having unrealistic expectations of market returns and not understanding the relationship between risk and reward may lead people to make the costly mistake of falling into investment fraud.

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