BC Business
When Theo Wong and a friend wanted to meet more people around Vancouver who shared their love of talking stocks, they simply logged on to their preferred social-networking website and set something up. Hardly earth-shattering stuff: these days, it takes mere minutes to find dozens of investment discussion groups in B.C. using such sites as Craigslist, Facebook or Meetup. But yawn-inspiring as most of the groups may seem, market regulators sense danger.
Hardly earth-shattering stuff: these days, it takes mere minutes to find dozens of investment discussion groups in B.C. using such sites as Craigslist, Facebook or Meetup. But yawn-inspiring as most of the groups may seem, market regulators sense danger.
The B.C. Securities Commission recently released a warning to anyone involved in website-facilitated investment groups to be on the lookout for affinity frauds. This is by far the most effective kind of investment fraud around, says the commission’s executive director Brenda Leong. Fraudsters try to sell their story into a religious, cultural or other group where the members’ shared trust helps spread the scam. “When you look at how these online networks are set up,” says Leong, “they form a foundation for allowing that to happen.”
Wong’s group, an educational meeting for beginner stock investors, has been running for about a year. The 30-year-old financial software developer says almost 50 people meet each month, and companies regularly come out to talk about their sectors. Kids hustling chocolate bars door-to-door for their baseball team are probably a bigger scam threat than Wong and his friends, he says, but the group did manage to attract some of the wrong people early on.
“We had some shady individuals near the beginning when we started the group, but I think they quickly learned that we’re not about pumping stocks here,” he says. Some guests “were just trying to cash in on ignorant people, whether it’s to buy private-placement stocks or just to bid up their penny stocks . . . . You’re never going to be fully rid of those people.”
Leong cautions investors to be on the lookout for any groups touting high returns, secret information, tax-free setups or endorsements from friends. But if the networking websites really are crawling with frauds, they must have learned that trick already; nearly all of the groups claim to be merely educational.