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Troubled times lead to more scams: MSC

By: Geoff Kirbyson

Posted: 01/31/2009 1:00 AM | Comments: 0 (including replies)

The Manitoba Securities Commission is bracing for a busy year of investigations.Len Terlinski, investigator of the provincial watchdog, said the stock market meltdown during the latter half of 2008 has created an ideal environment for scam artists looking to peddle investments they're not licenced to sell or products designed to rip people off.

He said investors are particularly susceptible to boiler-room schemes, where fraudsters cold-call people offering no-risk, high-return opportunities from essentially any room where multiple phone lines can be installed. The opportunities are usually offshore and investors are pressured to hand over their money as quickly as possible because the investment is said to be about to shoot to the moon.

"Investors have lost a lot of money in the market, they don't trust the market and they've taken their money out of the market after taking a beating," Terlinski said. "They're sitting on a pool of cash that's earning almost no interest and they're vulnerable to getting a phone call with an offer of a guaranteed investment that will earn 12 per cent. When they go to a legitimate broker, (the broker) says nobody knows where the market will go this year. (Investors) are looking to recoup their losses as quickly as they lost their money."

The MSC issued its first-ever annual report this week in which it outlined its enforcement activities during the year. Terlinski said it wanted to let investors know that just because its investigators aren't testifying at major court cases every month, it doesn't mean they're not working to protect them.

He said the MSC undertook 440 investigations during 2008, down from 494 in 2007 and up from 390 in 2006. Twenty-five of the investigations last year were turned over to its legal department for some kind of action, down from 124 the previous year and up from seven in 2006.

Terlinski said its biggest investigation of the past 12 months culminated in a $100,000 fine -- the maximum it could impose -- on Jack Wladyka, a financial adviser who was found to have cheated clients out of millions of dollars. The most offensive of his actions involved taking Rose Rudko, an 83-year-old widow, for $3.3 million.

Rudko, who was fully reimbursed, died in September.

Terlinski said investors should also take precautions to protect themselves. For starters, they can educate themselves about their financial situation.

"The more knowledgeable you are, the more you can speak knowledgably with your adviser. I'll ask people who say they don't understand investments if they've spoken with their adviser and they'll say, 'Yeah, but I didn't understand anything he was telling me.' They just nod their heads and smile. You can't be too embarrassed to ask your advisor about something you don't understand," he said.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 31, 2009 B2

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