VANCOUVER and CALGARY, April 23 /CNW/ - With the recent increase in
public inquiries regarding investments in real estate securities, the Alberta
Securities Commission (ASC) and the British Columbia Securities Commission
(BCSC) are urging people who are considering this type of investment to do
their homework before investing.
"Many of these investment opportunities are offered by private companies
selling real estate securities in the exempt market," advises ASC Executive
Director, David Linder. Private companies are not required to give the same
ongoing disclosure (financial statements, press releases or material change
reports) as public companies do.
"If investors are considering investing in these opportunities, it's
important to understand that in the exempt market, you are largely on your own
without many of the investor protection provisions that are mandated when
investing in a public company," says Linder.
The exempt market generally applies to the sale of securities to
investors without a prospectus and the advice of a registered dealer. Some
securities are sold under the offering memorandum (OM) exemption. OMs provide
varying levels of information about the investment and, unlike prospectuses,
they are not subject to a review by securities regulators.
These exemptions allow the sale of securities to investors who meet
certain criteria - for example, investors who have a relationship with the
company or principals and therefore have direct access to information about
the investment, or investors who have sufficient financial resources to
withstand a loss.
"Investors need to remember that these types of investments are often
risky, and high returns are not guaranteed," says BCSC Executive Director,
Brenda Leong. "Sometimes the potential returns described are based on past
history, not current market conditions. The securities are usually not listed
on any stock exchange, which means your ability to resell them to liquidate
your investment is extremely limited, if not impossible."
Concludes Linder: "The most important piece of advice to give to people
considering an investment described by an OM is to read the 'risk disclosure'
in the OM. Then they should consult with a person who is not participating in
the deal, such as a lawyer, banker, accountant, financial adviser or someone
else with business acumen, before making any decision to participate in the
To protect yourself, you should:
- Make sure the investment is suitable for your risk tolerance and
- Be clear about the terms and jargon used to sell the investment. If
you don't understand something, get clarification in writing.
- Seek independent advice from a lawyer or financial adviser.
- Be aware that you may not have the same legal rights as you would
with an investment issued under a prospectus.
- Understand that reselling private company securities can be difficult
due to resale restrictions or lack of market.
The "For Investors" section of the ASC website
(www.albertasecurities.com) gives investors the information and tools they
need to "Check First" before investing. This includes a "How do I check out a
real estate investment opportunity?" section with tools for conducting
background checks, gauging your risk tolerance and looking up a company's
record with the ASC. The site also provides an investor alert that explains
real estate investment seminars and the "red flags" of investing.
InvestRight is the BCSC's one-stop resource for investors to educate
themselves on how to make informed investment decisions. Its comprehensive
website at www.InvestRight.org provides a wide range of tools to help
investors develop critical thinking skills they need to protect themselves -
information such as how to do background checks, investment products, a scam
meter and video clips from victims of investment fraud. Read the Investor
Watch on Private Companies
The ASC is the regulatory agency responsible for administering Alberta's
securities laws. The BCSC is the independent provincial government agency
responsible for regulating trading in securities within British Columbia. Both
agencies are entrusted to foster fair and efficient capital markets in their
provinces and to protect investors.
For further information:
For further information: Media Inquiries: Mark Dickey, Alberta
Securities Commission, (403) 297-4481; Andrew Poon, British Columbia
Securities Commission, (604) 899-6880; Public Information: ASC Public
Inquiries, (403) 355-4151, Toll Free 1-877-355-0585; BCSC Public Inquiries,
(604) 899-6854, Toll Free 1-800-373-6393