RRSP Scam Warning
under the Securities Act, R.S.P.E.I. 1988, Cap. S-3
The Securities Division of the Office of the Attorney General is warning the public to be on their guard against an RRSP scam that has come to their attention. Those targeted for the scam include people who have been provided considerable pensionable benefits payouts after their jobs have been terminated.
Those perpetuating the scam usually solicit customers through newspaper ads. They will tell customers that they represent a company that has discovered a loophole in tax laws which allow you to access money which is locked in to your RRSP. Those who buy into the scam will be instructed to purchase shares in this company through a self-directed RRSP account. The company makes a commitment to either refund or lend a portion of the share purchase price back to the buyer. In some cases this refund or loan can amount to 70 to 80 percent of the purchase price.
What this means is that, while you get the money, the company’s records will show either an outstanding balance for the purchase of the shares or a loan payable to them. At some time they could require you to repay the loan or settle the account. Failure to do so might mean forfeiting the shares you purchased, in the process losing the 20 to 30 percent that the company retained. If the company goes bankrupt with this outstanding balance on the books, the receiver, on behalf of the creditors, could require you to settle the account immediately.
As always, the best defence against being caught in such a scam is to consult with an independent professional adviser to see if the investment is suitable. You should also investigate fully whether the investment is legal under securities laws, and whether there are tax consequences to the investment. Ask the person promoting this or any other investment scheme which strikes you as out of the ordinary if both they and the investment are registered with the Securities Office.
Anyone who has had any dealings that appear to fit the above description are requested to contact Janice Callbeck at 368-6288.