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Investment Scams
What are investment scams?
These are schemes cleverly designed to trick people out of their money by promising high returns on an investment.
Investment scams are promoted on the internet. Fake and dodgy share schemes are marketed by telephone salespeople with high pressure and
sophisticated selling techniques. Sometimes investment scams are promoted within groups of people with common interests.
Investments scams come in various forms but they have common characteristics.
What to look out for
The higher the promised rate of return, the greater the risk, and the more you should investigate.
Beware of schemes which
• promise very high returns with little risk - these promises are too good to be true
• give little information in writing - all legitimate investments must have documents that explain the investment
• claim to be "safe" or "risk-free" - all investments have some degree of risk have no Investment Statement or Registered Prospectus
• give few or no details about the person or company making the offer
• have no Investment Statement, Registered Prospectus, or financial statements.
Beware of offers which claim that
• you must take up the offer immediately or you'll miss the opportunity - legitimate companies don't pressure people to act without time to look into the deal
• returns come from the "top 100 world banks", "prime banks", "top 25 European banks" or similar statements - these agencies do not exist
• this is a "private" offer, and only open to a select few
• the scheme must be kept confidential in order to succeed.
Avoiding investment fraud
Whilst most people are aware of the notorious large-scale commercial frauds that have been uncovered, it is not commonly realised that
private individuals are the direct victims of a large and increasing number of confidence tricks, deceptions and other fraudulent schemes.
Such frauds are rarely featured in newspapers or on television because they may seem insignificant, but the impact on the people concerned
is extremely serious. It is quite possible, for example, to lose more money as a result of fraud than any other crime - and not just money
- your pension, your life savings, even your home can all be at risk.
A fraudster is not easy to recognise. He (or she) could be the polite salesman who calls at your house; or that friendly-looking bloke in
the pub who is willing to let you in on a sure-fire thing. He may be someone you know well and would not dream of thinking of as a
criminal. Essentially the fraudster aims to convince you that giving your money to him is perfectly reasonable - whether it is for an
investment, a purchase, a business proposition, or anything else.
Whilst there are many fraud schemes, their common characteristics tend to be that they promise a large amount of future wealth and depend
for their success on your trust of the fraudster. It is this abuse of your trust that allows frauds to occur.
Cold Calling
Generally cold-calling for investment business is prohibited by law, so be wary of apparently generous offers which "turn up out of the
blue".
Unusually high returns
Beware of schemes which offer unusually high rates of return when compared to, for example, the interest rates available from Building
Societies. Generous offers may be just a means of arousing your interest in a dubious scheme.
Take your time
Never make a major financial decision or sign anything on the spot. Always take your time to consider what you are doing.
Get independent advice
Investment businesses are required to be authorised by the Financial Services Authority (FSA) to carry out investment business. As a
general rule, don't get involved with an unregistered organisation. The FSA maintains a register of authorised businesses which can be
easily checked.
Cash transactions
Be wary of individuals who insist on dealing in cash. The use of cash may indicate that proper accounts are not being kept. Be
particularly careful about paying cash in advance.
Spread the risk
Do not "put all your eggs in one basket". For example, never commit all your life savings to a single investment scheme.
Overseas Organisations
Be cautious about investing in an organisation based outside the jurisdiction of the British Courts. In the event of difficulty it may be
practically impossible to seek a legal remedy.
Avoid an obviously "dodgy" deal
Some fraudsters try to raise your enthusiasm by bringing you in on a scheme to avoid paying tax, or even to help them remove assets
illegally acquired in another country. Remember that you are only being offered this "opportunity" so they can test your gullibility
before you are set up as the victim of the fraud.
Finally,
"Remember that if an investment opportunity seems too good to be true - it probably is!"
Where to find more information?
www.sec-com.govt.nz
Securities Commission - Check the New Zealand Securities Commission website for warnings about dubious
investments and a list of overseas brokers who have approached New Zealanders with bogus share offers.
www.companies.govt.nz
Companies Office - Check with the Companies Office to see if the company is registered in New Zealand.
www.sfo.govt.nz
Serious Fraud Office - check with the SFO for any warnings about current fraud.
www.nzx.com
New Zealand Exchange - visit the Exchange's website to find a New Zealand broker if you are wanting to buy shares
in New Zealand or overseas companies.
www.fibv.com
International Federation of Stock Exchanges - visit to check any international broker company.
www.sorted.org.nz Retirement Commission - for personal investment information visit the Retirement Commission online.
Report it!
Scamwatch does not receive reports of this type of scam. The New Zealand Securities Commission provides warnings on its website for
www.sec-com.govt.nz
Investment schemes and overseas brokers who have not been disclosing the type of
information about themselves and their business that is required under New Zealand law. Please direct any enquiries about investment
schemes or overseas brokers to the Securities Commission.
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