How To Spot An Investment Scam

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If you are scouring the markets for investments that maximise returns, you need to know how to spot dodgy companies and advisers .

In the UK, in common with many other countries in Europe and North America, advice firms should be licensed by the Financial Conduct Authority (FCA).

The FCA is the government watchdog responsible for policing the investment industry to make sure advisers do not overstep the mark with claims that they make about the products they are selling.

Licensed in FCA terms means advisers and firms must be authorised to sell specific financial services like pensions and investments.

The confusion comes when advisers are not authorised – for instance a mortgage adviser needs extra qualifications to recommend a pension or a regulated firm allowed to sell investments pushes unregulated products such as storage pods, overseas property or cryptocurrency.

Why use a regulated adviser?

If a financial adviser is authorised and regulated by the FCA, investors can take gripes about them to the Financial Ombudsman or the Financial Services Compensation Scheme (FSCS).

If the advice firm is not authorised, investors have no recourse other than the courts to try to get their money back if things go wrong.

What are considered dodgy investments?

Any investment offering a high rate of return is risky and may turn out to be a scam. The FCA says the basic rule is if something sounds too good to be true, it usually is, so don’t get involved.

This applies even more if the adviser has contacted you out of the blue by phone, text or email.

“There will usually be pressure to invest quickly or returns that sound too good to be true,” says the FCA.

“Scams are often based outside the UK but claim to have a UK presence, often a prestigious City of London address.

“Scam firms often suddenly close investor’s trading accounts, refusing to pay back their money.“

Victims are often targeted because they are listed as shareholders on public registers.

These are investments that the FCA does not regulate, so cannot be considered by the Financial Ombudsman or FSCS:

  • bamboo
  • cryptocurrency
  • diamonds
  • gold
  • graphene
  • hotels
  • international forestry
  • land for development
  • land overseas
  • overseas agriculture
  • parking
  • precious metals
  • storage
  • student accommodation
  • sustainable energy
  • UK forestry
  • Wine

Reporting a scam

Check out investments  with ScamSmart or contact the FCA by calling 0800 111 6768 or complete an online report

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