Investment scam operators often promise very high returns with little risk to your initial capital. Suspect financial schemes can include initial public offers in high growth companies, options, gold or foreign exchange trading services, betting systems or new specialist investment areas such as carbon credits.

Scammers can approach investors via email, unexpected phone calls or even send enticing share offers sent via post from overseas. Often investors who have lost money previously will be followed up by other companies trading ‘victim lists’ with a new offer of recovering or investigating and charging the rogue company involved for a small fee.

Case Study: Investment scam – $170K lost

“I was contacted by an overseas broker suggesting I could buy shares in a company soon to list on the stock market. They had documents suggesting the floatation was genuine and many shares were being purchased. They also sent me a passport scan for the broker to confirm they were a genuine person and I believed the share offer and the company was real. Once I had invested the money the company disappeared and I can no longer contact them.”

‘Boiler rooms’ have operated for many years targeting investors with such stories by phone and increasingly online. In many cases, they have professional looking websites and smooth talking sales staff who are skilled at sealing a deal with the promise of good returns.

How to spot an investment scam

This advice from the Financial Markets Authority. An ‘investment’ is likely to be a scam if you are:

  • Contacted about an investment opportunity by someone you don’t know.
  • Promised very high returns with little risk. These promises are nearly always too good to be true.
  • Given little information in writing. All legitimate investments must have documents explaining the investment.
  • Told the offer is known only to a select few. This is often a ploy to make you feel special.
  • Asked to keep the investment a secret. This is to stop the authorities hearing about it.
  • Not told who is behind the offer or given a physical address. Legitimate businesses give names and full addresses.
  • Promised access to ‘secret’ overseas banking markets supposedly offering very high returns. These markets don’t exist.

Protect yourself

This advice from the Financial Markets Authority.

Before you invest, do your research. Ask to see the product disclosure statement. Scammers rarely put things in writing, but almost all legitimate investments offered in New Zealand must have this document. Here are some steps to follow to avoid being scammed:

  1. Find out the legal name of the business you are dealing with.
  2. Check the business/individual is regulated by us – the FMA has lists of licensed providers.
  3. If a business is not regulated in New Zealand, be very wary – it’s almost impossible to get help if things go wrong.
  4. Check the FMA’s warnings list and familiarise yourself with the hallmarks of scams.

New Zealand internet users should be suspicious of any unexpected investment offers and always deal with companies authorised to operate in New Zealand. Registration on the Financial Service Providers Register (FSPR) is not an official approval of an individual, business, or organisation. It also doesn’t necessarily indicate the provider is licensed or regulated in New Zealand or any other country. The Financial Markets Authority provides lists of individuals, professionals, markets and businesses licensed or authorised to operate in New Zealand.

Useful links

Report a scam

Help if you have been scammed or think you are about to be scammed: Netsafe can’t open investigations or track scammers, but we can offer support and advice for people who have lost money in a scam, or think they are about to. This includes letting you know the steps you can take depending on the scam you’re in and giving you advice about how to stay safe in future. You can report a scam to www.netsafe.org.nz/report.

Our help service is open from 8am – 8pm Monday to Friday and 9am – 5pm on weekends.

 

Report a scam

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