Caller: Oh, I thought lawyers could practice all areas of law.

Me: Well, technically they can, although I specialize in certain areas.

Caller: Like what?

Me: Well, securities law, for example.

Caller: Oh, so you don't work for normal people, then.

Indeed. Although most of my securities clients consider themselves basically "normal", the gist of the comment lingered. Does my world of offering memoranda-this and national instrument-that have relevance beyond the companies and investors with whom I work?

Redemption came a day or two later. I was at home one evening scanning the Saskatchewan Financial Services Commission (SFSC) website which, in addition to notices regarding changes in securities law, also lists cease trade orders against those who have unlawfully sold securities. I was clicking through this naughty list when my wife, who was behind me reading along, exclaimed "How can anyone fall for these scams?"

Eureka! My chin jutted. My chest rose. My voice took on a professorial tone: "Because they don't understand securities law well enough to distinguish a scam from a legitimate offering."

Needless to say, I had to go on. I am, after all, a lawyer. And, with no kids in the tub to save her, she had to listen.

Most people now know that Nigeria is not teeming with millionaires just aching to share their fortunes. But this skepticism doesn't always extend to unlawfully-sold securities, which range from the exotic (land banking in Latin America), to the more mundane (local lake lot developments).

Bernie Madoff's investors can attest that it is difficult to recognize a scam. Also, the rules in different jurisdictions can vary, not all of which mirror Saskatchewan. Still, experience has identified three quick rules of thumb to help distinguish legitimate transactions from shadier ones:

(1) Paper. In the securities world, paper is the coin of the realm. If you are being asked to buy securities, ask for the paper. Legitimate offerings will have good paper, and probably lots of it. At the high end is a prospectus - a 100+ page tome, the existence of which is a pretty good sign things are on the level. The vast majority of securities in Saskatchewan, however, are sold under prospectus exemptions, meaning there won't be one. Instead you'll have to review a subscription agreement, and possibly an offering memorandum. But even these should be complex (and relatively lengthy) documents. If you are given a one or two page document, or are told that there is nothing else you need to read or sign - run.

(2) Content. When you read the paper, does it read like an advertisement, or a warning? Ironically, the latter is better. Offering memoranda are required by law to contain certain rather dire warnings and disclaimers, and are prohibited from making lofty promises about things like future share value, return on investment, or your ability to re-sell the securities. If the documents you receive are full of good news and grand expectations, but light on risks - run.

(3) Prospectus Exemption. As stated, most securities in Saskatchewan are sold pursuant to prospectus exemptions. If you are being sold securities, ask the seller what exemption is being used. A reputable issuer or its promoter should be able to quickly identify the exemption, and the requirements for subscribers to qualify. If your question is met with a blank stare, or a vague explanation as to why no exemption is needed, you guessed it.........run.

The other side of this is the issuers, who must ensure they are compliant with applicable securities laws when they offer to sell securities. It has happened where an otherwise reputable and well-meaning company gets caught by securities regulators. Maybe it attempted to sell its shares, and no one gave any thought to prospectus exemptions, or it was deemed wise to save a few bucks and use a home made business plan or Powerpoint presentation as a selling document. Suddenly the SFSC is contacted about these irregularities and the company finds its name on the naughty list, alongside some schemer trying to sell convertible debt instruments backed by a Peruvian gypsum mine.

So no matter how normal you are, buyers and sellers of investments need to be aware of securities laws from time to time. But when you're buying, remember that you are the last line of defense. Counting on others to protect you could be disastrous to your financial health.