The Ontario Securities Commission (OSC) is warning investors to watch out for unsolicited investment offers, after receiving complaints about aggressive telephone stock promotions. Typical complaints describe high-pressure sales tactics and verbal promises that the stock will soon be listed at a higher price. These types of promises violate the Ontario Securities Act.

High-pressure sales tactics are a warning sign to investigate before you invest; a great investment opportunity should stand up to the test of further research. Ontario securities law is designed to maintain fair and efficient capital markets. Unfortunately, unscrupulous individuals closely scrutinize the laws, looking for new ways to exploit unsuspecting investors.

One example of this is the "pump and dump" schemes that operated in the late 1990's. These operations used aggressive sales tactics to sell penny stocks to investors at inflated prices. After maximizing their own profit by creating an artificial market for the stocks, they left those same investors holding worthless shares. The penny stock dealers defended their actions by pointing out that sellers are free to ask any price for their securities on the open market - it is up to the buyer to decide what price they want to pay. While this philosophy is a cornerstone of the free market economy, these companies were not upholding the spirit of the law. OSC Staff established that the "pump and dump" operators were "not acting in the public interest" and the Commission put them out of business.

In a more recent example, the OSC has received complaints about abuse of the "Accredited Investor" exemption. Generally, a prospectus must be issued before a registered representative can sell shares to the public, however there are exemptions to these requirements. The "Accredited Investor" exemption allows a company to sell securities to qualifying investors without a prospectus.

To qualify as an accredited investor you must have more than $1,000,000 in financial assets, net of liabilities. This includes cash and securities but not your home. Alternatively, you must have personal annual income over $200,000 or total annual income combined with a spouse of $300,000 for at least two years. The reasoning behind this exemption is that if you meet these criteria, you can afford professional advice and can afford to take on a higher risk with your investment activities. If you do not meet these criteria, you may be taking on more risk than you can afford.

Some unscrupulous salespeople have persuaded investors who do not meet the "Accredited Investor" criteria to sign a form stating they are accredited, and invest in high-risk ventures. They do this by suggesting that the government unfairly allows wealthy people to take advantage of the really great investment opportunities. The reality is that the exemption rule is in place to make it easier for small businesses to access capital, and provide protection to investors.

To protect your money:

• Be wary of unsolicited offers received over the Internet or by telephone
  
• Check the registration and background of the person or company offering you the investment - call the OSC Contact Centre toll-free at 1-877-785-1555 or view the Registrants List online in the Market Participants section of the OSC website www.osc.gov.on.ca
  
• Never sign documents you have not read, or do not accurately reflect your financial situation. If someone asks you to fill out a form with false information, ask yourself if this is the kind of person you should rely on for investment advice.
  

For further information or to file a complaint, contact the Ontario Securities Commission at 1-877-785-1555.