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Protection Against Becoming ‘Easy Prey’ with Canadian Investments
Leading commentators and writers about fraud, Al Rosen and Mark Rosen, have written another book exposing the obstacles faced by investors in Canada today. The authors are forensic and investigative accountants with extensive experience in providing investment advice and Court testimony.
Easy Prey Investors: Why Broken Safety Nets Threaten Your Wealth provides explanations of specific weaknesses in financial reporting requirements, most of which are being actively exploited, and also offers advice on how to spot their use.
It is remarkable how the authors demonstrate the systemic failures Canadian investors are exposed to. Examining the issues in the context of collapsed or troublesome Canadian listed companies, their ultimate message is that investors now have no choice but to learn how to protect their retirement and other savings, whether they are invested in pension plans, mutual funds, or stocks and bonds. The authors argue that it is not just outright scam artists peddling Ponzi-like schemes but also portions of blue chip Canadian stocks that are riskier than they appear.
Analyzing the history that led to this, they canvas a series of actions and inactions over the past two decades that resulted in, what they attribute to, the minimal protections available to Canadian investors today. Twenty years ago, the Supreme Court gave a narrow interpretation that significantly reduced the utility and reliability of annual audited financial statements for investors. Nevertheless, these same financial statements are used as the primary basis for investing by analysts and portfolio managers who fail to adjust them sufficiently, leading to incorrect assessments, overstated share prices, and investor losses.
The book depicts an investment landscape that has since been plagued by ambivalence. The authors point to the ineffective steps taken by provincial securities regulators to deal with misleading financial reporting, several notable accounting collapses, and numerous pyramid-like or Ponzi investment structures that have resulted in widespread losses.
They then point to what they cast as an ill-fated move by Canada’s external auditors – to allow a loosening of the accounting rules with the introduction of International Financial Reporting Standards (IFRS). At a time when other countries were busy tightening financial regulations, Canada, in their view, saw fit to do the opposite. The authors reveal the extensive power given to corporate management by IFRS to inflate reported income and cash flows, and craft figures that meet their lucrative compensation targets.
The Rosens highlight that many corporate balance sheets now include assets with highly dubious values. They explain how this lack of transparency has extended from traditional sectors like technology and healthcare and now results in questionable values in industries such as real estate, pipelines, and telecoms, which have always attracted yield- and income-seeking investors and retirees.
What’s more, according to their account, law makers have done almost nothing to demand that self-regulated bodies abandon their self-interested ways, and audits firms and securities regulators continue to serve the wants of their corporate clients, giving little attention to the needs of investors.
Easy Prey Investors seeks to show us that investors in Canada now have no choice but to learn how to protect themselves. This book provides considerable advice and examples of Canadian-based financial trickery. It may just be too risky not to read it.
Lincoln Caylor of Bennett Jones is recognized as a “leading counsel and commentator in the asset recovery field,” by Chambers Canada 2016, and is listed as a Most Highly Regarded Individual in North America by Who’s Who Legal: Asset Recovery 2015. The sole Toronto member of ICC FraudNet, he is internationally recognized for leading state-of-the-art asset tracing investigations and pursuing asset recovery litigation and enforcement actions in prominent, high-value international financial frauds and other economic crimes.
ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.