Keep your wits about you: Everything you need to know about investment scams
The promise of easy money is – understandably – hard to resist. However, when it comes to investments, it’s important to keep your wits about you. If an investment opportunity sounds too good to be true, it often is.
How do such scams work?
The Hong Kong Police have received numerous reports about investment scams in recent months, all promising highly lucrative returns in just a matter of months.
In one case, the conman approached people through a shared acquaintance – an investment consultant – to offer exclusive shares in an overseas company at below-market prices, promising high returns. After the alleged lock-up period was over, the conmen disappeared without a trace – and the victims realised they’d been conned.
In another instance, the victim was approached by a conman with an investment plan and bank guarantee. He guaranteed fivefold returns in a single month! Naturally, the promised returns never materialised, and the conman soon fled with the victim’s money.
What do they have in common?
The conmen often pose as successful investors or businessmen claiming connections to the rich and famous. They readily provide bank statements as proof of assets, invite victims to investment talks given by industry professionals, and even offer tours of companies they claim to be involved with. Following the investment, the conmen backtrack on the previous promises, soon disappearing – and taking the money with him.
How to avoid falling victim
In order to protect you and your wealth, the IEC has come up some tips to keep you from becoming the next victim.
- Beware of investment plans with unrealistic returns, especially those claiming a low level of risk and a quick yield. The greater the returns, the greater the risk!
- Stop and think. Cons work best when the victim is pressured into making rash decisions. The conman applies time pressure however they can – the deadline for share subscription is near, the market is volatile, and so on – forcing you to make hasty payments. Before making any decisions stay calm, consider all factors, and identify the risks.
- Do your research – consult people that you trust. Avoid making decisions alone, and consult licensed independent financial planners. Don’t blindly trust the information provided; investigate the intermediary on your own.
How to check your intermediary
Before committing to any major investment, you should check whether your intermediary has obtained the appropriate licenses. If you’re worried your intermediary may not be trustworthy, try hunting for registration permits, audited operational documents, and financial statements. You can also check if their claimed investment products are real by consulting the relevant regulatory bodies, such as the Securities and Futures Commission for securities and futures. For more information, try reading our guidelines on how to choose an intermediary.
Click here to learn more about investment dos and don'ts. Be a smart, vigilant, and responsible investor, and you won’t be easy prey for scam artists!