©The Star (Used
by permission
by Securities Industry Development Cente
MINIMISE the risk of losing your savings to scams by recognising the different types of illegal investment schemes that are plaguing our society. Here are some typical characteristics and promises made by scams:
• For every investment that you make, you will receive a high return, for
instance, 20%–30% per month, every month.
• You are not shown the so–called quality product you are allegedly
selling, but you will get paid for every person you recruit or sign up.
• You are told that the offer is for a limited time and that you MUST
join or buy today.
• You are told to send money to some foreign banks in foreign currency to
claim a prize but you do not remember entering into any contest or lucky draws.
• You receive unsolicited phone calls offering investment opportunities
and you have no idea how the company has obtained your phone number.
• You receive unsolicited e–mails asking you for your bank account number
because they want to send you money, usually millions of US dollars, from some
foreign countries. This is, strictly speaking, not an investment scam, but is
still a scam, and a popular one.
• You are offered an investment product that guarantees large profits
with no financial risk.
# You are asked to invest in an investment scheme. The address and contact
information of the investment company offering you big money is located in a
foreign country where you cannot verify its physical location.
• You are offered a “free gift” in order to get something later, for
example, a larger amount of money.
• You are offered job opportunities with high pay without any need for
relevant experience or academic qualifications.
• You are approached by someone who claims to be an agent for foreign
trading houses (for example, based in Macau, Bahamas, British Virgin islands) to
trade in foreign indices (for example, Hang Seng index), commodities (for
example, coffee) or forex (for example US$, Yen) but you need to deposit some
money as a “margin” in some foreign currency before a trade can be executed.
• It is hard to find any information about the company’s licence or
physical existence in any regulator or authority’s website.
• You are required to remit money to a foreign country through
telegraphic transfer or through any other mode for the investment.
The invitation to the above scams takes many forms. In addition to the
unsolicited phone calls, the more “preferred” mode is through the Internet.
Potential victims are also lured to attend seminars or face–to–face meetings.
If you are faced with any of the above situation, what should you do to protect
yourself?
Protection #1: Avoid any investment that guarantees regular or large
profits for a small outlay. Be extremely wary of companies that guarantee large
profits or tout high performance over a short period of time. You must remember
that every investment involves risks and you must have often heard, “high risk,
high return!” Be extra careful, especially if the investment is supposed to give
you high returns with low or no risk.
Protection#2: Be wary of plans that focus on paying you to recruit others
instead of paying you to sell products and services. Key words that should
caution you are “downline” or “pyramid”.
Protection#3: Never sign up for an opportunity in a high–pressured
situation, such as “you have a limited time to join this scheme” or “buy now or
miss out”. Remember, if it is a legitimate business, it will still be around
tomorrow, next week, next month or next year.
Protection#4: Be sceptical about unsolicited phone calls about investments
from offshore salespersons or companies with which you are unfamiliar. If the
caller says that he or she is a broker’s dealer or investment adviser licensed
by an authority abroad, ask for the name of the foreign regulator by which it is
licensed and check the websites of the foreign regulator which would have a list
of licensed or registered persons. You must always check the credentials of a
licensed person with the relevant authority before parting with your money.
Protection#5: Be sure you get the company’s performance track record.
Also ask for written information on the investment product and the business, as
well as the risks involved in the investment. Read carefully the prospectus or
annual report of the company before investing.
Protection#6: Do not provide any financial or personal information before
you establish that the company is legitimate.
Protection#7: Always check against the regulator’s websites, for example,
the Securities Commission’s website (www.sc.com.my) for information on
investor alerts, or the list of licensed intermediary companies and so forth.
Protection#8: If in doubt, do not invest. Why should you risk your money if
you cannot get solid information about the company, the salespersons/agents, or
the investment?
Protection #9: Never remit your money through telegraphic transfer or
through any other mode to any foreign jurisdiction without checking the
investment’s legitimacy.
The Securities Industry Development Centre (SIDC) was established in July
1994, and is the training and education arm of the Securities Commission (SC).
Its mission is to build human capital, guide investors in the capital market and
develop investor education programmes to meet the objectives of the Malaysian
Capital Market Masterplan and address national development needs. It is
recognised as a premier training centre for capital market partici pants and
regional regulators.
Log on to SIDC–Malaysian Investor website:
www.min.com.my for information on how to be a wise investor.