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Investment fraud is quickly becoming a common occurrence experienced by Ontarians and can be challenging to realize before it is too late. There are a substantial amount of investment products available on the market, which can easily overwhelm the average Canadian investor. Therefore, many individuals looking to make smart investments look to financial professionals, such as mutual fund advisors, financial planners, and brokers, to learn about their options and make informed decisions on where to put their money. However, before making a critical financial decision, individuals should be mindful about acting on any advice or opportunity, as scams can be perpetrated on even the most seasoned investors.

What Is Investment Fraud?

Generally, investment fraud occurs when one party tries to get another party to make a financial investment based on false or misleading information. Investment loss can happen when funds are lost on an investment or a financial plan is negatively affected due to the negligence of the investor’s financial advisor. 

In our increasingly technology-based world, new investment scams attempt to obtain digital currencies, such as cryptocurrency, through social media, website or telephone advertisements, or dating websites and apps. In many cases, the individual attempting to gain the currency fraudulently tells the party how to act and what to purchase and promises high returns and benefits. 

When money is lost on an investment or savings account or a wealth management plan has been negatively impacted due to fraud or negligence on behalf of a broker or financial institution, it is essential to work with an experienced litigation lawyer to quickly resolve the issue and recover as much of the loss as possible.  

The Role of Financial Professionals in Investment Loss

“Financial professional” is a general term encompassing several professional roles, including accountants, financial planners, brokers, and financial advisors. Given the nature of their position, financial professionals are held to high standards and are obligated to act in the best interests of their clients. Brokers also have a duty to understand their client’s unique circumstances when performing any act beyond the execution of their client’s instructions. 

Financial professionals must only recommend investment options or products that are appropriate for the client based on their risk tolerance, personal circumstances, and financial standing. For these reasons, many people turn to financial professionals for advice on where to put their money to obtain the best return and place large amounts of trust in the professional advice provided to them. Therefore, in any broker-client relationship, a duty of care to some degree will be owed by the broker to the client.

Examples of Financial Advisor Negligence

Financial advisors may be negligent in a variety of ways. For example, advisors may fail to sufficiently warn clients about risks or tax consequences related to a specific investment. Advisors may also improperly advise their clients to invest in a product or account that is inappropriate given their financial circumstances, or they may fail to advise a client on how to suitably restructure their investment portfolio following a significant change in their personal circumstances, for instance, after a divorce or job termination. 

Signs of Investment Fraud and Scams

While investment fraud schemes are becoming more sophisticated and may not always be easy to spot, there are several red flags to consider before acting on certain advice or offers. Some common signs of scams and investment fraud include:

  • High pressure to make quick decisions;
  • Firms and advisors who are offshore or not registered with the Canadian Securities Administrators National Registration Search;
  • Unrealistic return guarantees and offers that seem too good to be true;
  • Exclusive offers and “insider information”; and
  • Actions without accompanying documentation.

Remedies for Investment Fraud and Asset Loss

In Ontario, a party may commence a civil lawsuit for investment fraud based on fraudulent misrepresentation, breach of contract, civil extortion, deceit, and unjust enrichment, among others. 

Civil fraud claims often require assistance from a skilled lawyer who can help their client navigate the legal nuances of such a claim by tracing, locating and recovering lost assets. When working on asset recovery claims, it is important to strategically manage the timing of the process and work with other professionals, such as investigators and forensic accountants, to ensure the best opportunity for recovery. 

In cases of investment loss or fraud, claimants may seek assistance from the court in granting an appropriate remedy, such as a civil freezing order, civil search warrant, or asset tracing order in cases where a claimant’s funds have been converted into other property.

In Canada, a critical case regarding investment fraud is Hryniak v. Mauldin. In this case, an Ontario businessman met with investors who he allegedly advised to invest millions of dollars into a company he owned. After the investors’ funds were sent to an offshore bank account and suddenly disappeared, the investors sued the businessman. The Supreme Court of Canada upheld a finding of fraud against the businessman.

Milosevic & Associates in Toronto Represents Clients in Claims of Investment Fraud and Investment Loss

The experienced litigation and securities lawyers at Milosevic & Associates represent clients who have lost funds due to investment fraud and negligence in investment advice. Whether you have received misleading investment advice or have lost digital currency, our lawyers are ready to help. Located in Toronto, our firm assists clients throughout the Greater Toronto Area and across Ontario. If you believe you have suffered financial loss due to fraud or negligent advice from a financial advisor, contact us online or call us at 416-916-1387 to speak with a member of our team.