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Customers who buy from unlicensed food vendors who have not gone through the required hygiene assessments are exposing themselves to health and safety risks. Paying for investment advice from unlicensed persons is no different. Be mindful of those so-called investment experts and mentors who are charging fees for the exchange of unlicensed investment tips and advice.

Investment courses under false pretenses

According to the Securities and Futures Ordinance, those dealing in or advising on securities and futures contracts must be licensed by the Securities and Futures Commission (SFC), and it is an offence to carry out the regulated activities without a proper licence. Unlicensed individuals have devised ways to cloak their illegal activities to circumvent regulatory requirements.

Typically, a licence is not required for imparting general investment knowledge and sharing of personal investment experience. Considering that investment-related courses and information have always been in high demand, unlicensed individuals exploit this by engaging in the regulated activities under the cover of “imparting” or “sharing” investment knowledge. Initially, they may present themselves as investment experts or mentors and establish a customer base by offering courses or setting up online discussion forums and social networking groups. Often they will attract customers by bragging about their investment successes and their ability to help investors make money. Individual followers who buy-in to their opinions and analysis may subsequently be invited to join a private social networking group. Followers thus end up paying for services that can only be offered by licensees, such as stock or investment advice, tips and trading instructions, or even the trading of securities on your behalf. Monthly fees charged by those unlicensed individuals can range from $1,000 to over $10,000.

Don’t get involved in unlicensed activities

Anyone who is willing to pay for stocks or investment advice, tips and trading instructions want nothing more than to make money, but why should it matter whether these are offered by a licensee or not, as long as they are accurate and reliable? The major difference is that unlike unlicensed persons, licensees are regulated to ensure that they are competent and perform their duties in a proper and professional manner, and they must be accredited to a licensed corporation. These licensed corporations must comply with regulatory requirements to be allowed to operate. Therefore, it is important to check with the SFC’s “Public register of licensed persons and registered institutions” that you are dealing with licensed persons and companies to avoid giving your money to unlicensed individuals.

Investors who follow the recommendations and instructions of unlicensed individuals may be subjected to market manipulation such as “pump and dump” schemes. These schemes generally do not involve stocks with large market capitalisation or an active market. Instead, the easy-to-manipulate stocks with thin trading or high shareholding concentration are usually favoured. Unlicensed individuals and their collaborators will buy these stocks in advance at a low price, after which they will recommend or issue trading instructions for others to buy with the aim of inflating or pumping the stock price. These stocks are then dumped at the inflated price with the manipulators profiting. The prices of these stocks usually collapse afterwards, and investors who followed the instructions to buy can suffer significant losses.

Develop a proper investment mind-set

  • The purpose of learning to invest is to understand how to do so through research, good planning and execution, instead of relying on “tips” and “advice”. In fact, it is difficult for anyone, whether licensed or otherwise, to consistently provide 100% accurate investment tips.
  • There are many experts and key opinion leaders on the internet, but it is difficult to verify whether they are competent or well-trained. As many consumers learn from bitter experience, their advice is often questionable at best. Consider this fundamental question: If you possessed inside information that would help you to make you a fortune, would you so openly share it with others?
  • If you are seeking advice on securities, look for a SFC licensee. You can search for a licensee in the “Public register of licensed persons and registered institutions”, which includes the licence details and status of licensed individuals and corporations, to verify if they can offer investment advice.


7 Sept 2018