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.
What to look out for
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.
- Consumer Affairs explain how investment scams work and looks at pyramid scams and MLM schemes in New Zealand
- New Zealand’s Financial Markets Authority provides investor education and advice including common warning signs it’s likely to be a scam and steps you can take to protect yourself. You can also download or print a PDF copy of their advice titled: How to spot an investment scam.
- Review the FMA’s warning notices and alerts and find ways to check warnings from international financial regulators.
- The International Organization of Securities Commissions (IOSCO) also collates investor protection alerts and warnings from countries around the world.
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