A CBC news reporter, Dave Sims, contact me about a week ago for a story he was working on; he wanted permission to use photos of the Concrete Equities protests that happened in June of 2009. They weren’t my photos, so I couldn’t give permission, but thankfully Sims found someone who had some photos for his article, which you can check out here. I spoke to Dave on the phone about my opinions about exempt market funds, and it was summed up as follows:
“Jason Dunn, another Calgary investor who has lost at least $10,000 in the Concrete Equities collapse, doesn’t share that view. He wants investors to have as many choices as possible — even high-risk ones — but he does agree that investors should be protected against fraud.”
What I meant by that statement is that properly informed investors who are qualified to take the risks (accredited investors) involved in exempt markets should be allowed to do so. I believe that people should be able to do what they want with their money, even if it’s high risk.
However…when non-accredited investors who shouldn’t be investing in the first place get advice from their financial consultants to invest with a company that has financial links back to the financial consulting agency in question…when officers of the company in question engage in business practices that bankrupt the company…and when outright fraud is committed by officers of the company who take money for one investment and use it as a down-payment for another investment…something is obviously very wrong with the system. These people either believed they were too smart to get caught, or they weren’t afraid of the penalties.
I’m unsure of whether or not the current laws are strong enough to keep these types of people in check, or enough to protect investors until it’s too late – it certainly wasn’t enough to deter my financial consultant from signing paperwork saying we were except from the investor limitations because we were “friends or close business associates of the firm”. I’ve learned many hard and painful investing lessons over the past five years…the biggest of which is to never take any financial consultant at his word. Always investigate on your own; even a Google search on the names of the people involved will give you some measure of understanding about their track record in the industry. It amazes me – in a shameful way – that I spent hours researching which digital camera to spend $500 on, yet spent zero time researching the people wanting me to invest thousands of dollars with them. One of the many lessons I need to teach my son as he grows up…
Just remember, ANYTHING can be manipulated. See Enron/Worldcom.
Regulators and auditors are people too, subject to the same temptations, greed and mistakes that afflicted the officers and advisors at Concrete Equities. When investing, I tend to assume that a good deal is too good to be true, unless I can prove it otherwise. I may miss out on a good investment opportunity this way but I haven’t lost any significant sums of money either.
I guess it always easy with hindsight to see where we make mistakes.
Good Luck!