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Regulators Warn of "unlocking" Scam Vikram Barhat, March 23, 2010

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Securities regulators in B.C. and Manitoba have raised the alarm about dipping into retirement savings for questionable investments that promise excellent returns and tax benefits.

So-called "unlocking" investment schemes that sound too good to be true really are too good to be true.

These investments typically promise debt reduction through new sources of income, immediate access to assets in locked-in RRSPs or RRIFs, unrealistic returns, and/or frequent high interest and dividend payments. These schemes are backed by aggressive advertising campaigns.

The investment advisory warns residents not to fall for unrealistic promises and urges investors to contact provincial securities regulator when approached with such an investment.

The schemes frequently involve investing in the shares or units of a public or private company or debt instruments such as bonds, promissory notes and mortgages. "However, the common feature of all of these schemes is the promise that you can immediately access a portion of the cash value of your RRSP, RRIF, LIRA, LRSP, or other locked-in retirement savings or income plan without paying taxes. In addition, these schemes sometimes promise excellent returns on the remaining investment or significant tax benefits," say the regulators.

Sellers of these investments advise investors to move their retirement funds into a self-directed account with the intention to hide the unlocking transfer from their financial institution or advisor. Once investors gain control of their funds in the self-directed account, promoters then instruct them on buying fraudulent investment schemes packaged in a variety of ways. Those who fall for them suffer significant investment losses in addition to serious tax and pension repercussions.

The regulators say investors can avoid getting duped by checking the registration status of the seller by searching the Canadian Securities Administrators National Registration Search at www.securities-administrators.ca and by having the investment reviewed by an independent financial or tax expert.