ASIC chases term deposit scammers targeting mum and dad investors

Australia’s corporate watchdog warns consumers about fake term deposit scams.

ASIC attacks term deposit scams

Australia’s corporate watchdog, the Australian Securities and Investments Commission (ASIC), is warning investors to be wary of products advertised as term deposit alternatives, which in fact offer riskier investment options.

Moneymag.com.au says these products “lack oversight, are often less capitalised and may include unlisted and illiquid assets”.

The warning is timely as older Australians, in particular, seek higher-earning alternatives to low interest bank accounts for their cash reserves – reserves that are earning less than 2 per cent after the Reserve Bank cut official interest rates to .25 per cent.

Savings.com.au explains that term deposits can be issued only by authorised deposit-taking institutions, are protected by the government’s Financial Claims Scheme, which guarantees $250,000 in the event of a bank’s collapse, and are supervised by the Australian Prudential Regulation Authority (APRA).

“If an investment product offers higher returns than a term deposit, it is more likely than not to be higher risk,” says ASIC deputy chair Karen Chester. “In the current uncertain and volatile markets, higher risk investment products are, more than ever, not for everyone.

“Products spruiking even a two or three percentage point higher return than a term deposit represents significantly higher risk. We are also seeing products offering only marginally higher returns with much higher risk profiles.

“Products should not be marketed as having features like low risk of loss, regular returns or easy access to withdrawals unless the product issuer has reasonable grounds to believe they have and will continue to have such features through the economic cycles.”

In April, The Guardian reported that ASIC had begun legal action against Mayfair 101, the firm behind the ambitious redevelopment of Queensland’s Dunk Island, claiming its advertisements were misleading and deceptive.

“The regulator’s case centres on advertisements and websites run by Mayfair that compare its products to term deposits, including claims it can provide favourable rates of return.”

ASIC raised concerns that a website run by Mayfair, termdepositguide.com, made claims its products were similar to term deposits.

ASIC objected to the use of phrases including “term deposit alternative”, “certainty” and “confidence” in online promotions for the products.

Mayfair 101 group said it would “contest ASIC’s claims in full”. It suspended withdrawals on the products.

ASIC released a statement warning consumers about investment advertising that compared fixed-term investment products to bank term deposits “because they may be issued by entities that are not well capitalised, not protected by the government’s Financial Claims Scheme, and not supervised by the Australian Prudential Regulation Authority (APRA). Some are also backed by concentrated portfolios of higher risk unlisted and illiquid assets.

“ASIC recognises that many consumers may be seeking higher and regular returns on their investments during this time because of low interest rates and market volatility. But there are significant differences between bank term deposits that are relatively low-risk products and fixed-term funds and debentures offering regular, fixed distributions that are higher risk investment products.”

ASIC ramped up its consumer awareness campaign having already disseminated published research aimed at discouraging investors from trying to capitalise on share-market moves.

The regulator is concerned about advertising seeking conservative investors looking for a reliable income stream.

The Australian Financial Review said ASIC’s surveillance focused on fixed-income products “pitched at both mum and dad investors and investors that qualify as wholesale by virtue of their net wealth, income, or the size of their investment”.

Have you been tempted by a product that promises higher interest rates than the best bank term deposit rates?

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    COMMENTS

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    fearlessfly
    3rd Jun 2020
    10:23am
    For God's sake, is there no end to the increasing flood of bastards trying to scam good folk out of their hard earned money? There's a new scam uncovered every week! If I had my way, when they are caught, I'd order they receive 150 lashes, have their fingers amputated, shot through the kneecaps and then transported to the Komodo Dragon island.
    Jem
    3rd Jun 2020
    11:29am
    In that order?
    fearlessfly
    3rd Jun 2020
    12:56pm
    Yes, they need the fingers to grip onto the whipping frame before the lashes are applied, and they need to be able to stand upright during the process.
    Discontented
    4th Jun 2020
    4:36pm
    Sounds good to me, these scamming oxygen thieves ruin peoples lives,
    Discontented
    4th Jun 2020
    4:36pm
    Sounds good to me, these scamming oxygen thieves ruin peoples lives,
    *Loloften*
    4th Jun 2020
    8:57pm
    Hahaha....could u add just a few verbal "lashes" (no blood pls) to the BIG4 bank CEO's fearlessfly? I recently closed my matured term deposit with one of 'em as all their very meagre % interest rates are an insult, especially when compared to their mortgage interest rates (gratefully no longer need one altho' happy for my kids' re relatively low, compared to the 17/18% we paid on mortgages, very lowest back then was eventualkly 8%). Thought best to just transfer term deposit to my normal "daily a/c" while re-research stockmkt....especially interested in USA's/ Elon Musk's SpaceX company if it's on their stockmkt.
    Farside
    8th Jun 2020
    11:46am
    Loloften,what interest rate do you think the banks should be paying for personal deposits in the current market? Stockmarket investing is suited for those who can take a long term view, say ten years or more.
    MAV
    3rd Jun 2020
    10:26am
    People should not be greedy. Common sense says that if a deposit fund is offering higher than banks it carries risk. That is your choice. It is not the risk of the public and they should never be made to bail you out - they would never have received any benefit. Go with the banks and then there is no risk, otherwise you may lose
    Blossom
    3rd Jun 2020
    11:14am
    There is considerable difference between Term Deposits and other types of accounts that people are led to believe are quick profit makers. Genuine Banks offer Term Deposits -you deposit a certain amount (your choice) for a set length of time and the interest on your deposit does not alter during that time. You can choose to have your interest added or paid into your normal Bank Account. Some do it monthly if you request that or you can choose to get the interest at maturity. You can roll over the balance of your account, deposit more funds into it, withdraw some of it or close it at maturity. The choice is yours.
    I would only ever do it with a Bank.

    3rd Jun 2020
    10:37am
    If it's too good to be true, then it usually is.

    Proverb from 900 BC.
    *Loloften*
    4th Jun 2020
    9:11pm
    So true - only 2 reasons scammers profit, ie: ppls lack of research or greediness.
    Anonymous
    5th Jun 2020
    9:11am
    Agree.

    I've been called both cynical and sceptical (funnily enough by certain people who tried to sell or con me into something that was 'too good to miss') in the past but I call it 'self preservation', especially when you've worked for every cent.
    Buggsie
    3rd Jun 2020
    10:41am
    Where are all the people who constantly bragged about their returns on bank shares? Mine paid zero this year and may not be much better in the near future. I guess you are all too busy trying to contact Centrelink in order to get on to the age pension. Thankfully most of our retirement money is in the bank, so to speak, so we are still OK.
    Anonymous
    3rd Jun 2020
    12:21pm
    Well I just made 28% on some bank shares this morning.
    Anonymous
    3rd Jun 2020
    12:53pm
    Age pension can be applied for on line 3 months ahead of due date, plenty of time.
    Mariner
    3rd Jun 2020
    10:58am
    Normally these adverts advise investors about the risks and also advise "that one could lose some or even all the monies invested". Admittedly it is in very small print at the end of the advert and us oldies would need a magnifying glass to read it. I am getting 1.4% on my term deposit for 6 months, not happy about that but what can you do? Have been on the share rollercoaster and do not want to go there again at my age and accepted the part pension.
    Maggie
    3rd Jun 2020
    3:30pm
    So, Mr or Ms Retiring Well, you are always very generous with your ideas, advice, opinions etc. and so please equally generously let us know where you got that 28% interest.
    We might stop believing a word you say otherwise.
    Circum
    3rd Jun 2020
    8:30pm
    Retiring does not say he got 28% interest.It could be capital gain.Some bank hybrids went down by around 28% recently with the virus scares but have since recovered,so its possible.
    Circum
    3rd Jun 2020
    8:30pm
    Retiring does not say he got 28% interest.It could be capital gain.Some bank hybrids went down by around 28% recently with the virus scares but have since recovered,so its possible.
    Maggie
    3rd Jun 2020
    8:38pm
    Why don't we let Retiring Well speak for her/ himself? That person generally has no difficulty finding words. The article was about interest after all.
    *Loloften*
    4th Jun 2020
    9:26pm
    Maggie, suspect Retiring Well was smart enough to do his/her research when our stockmkt crashed almost 3mths ago....some of the most relevant ones during this Pandemic (+ after ScoMo/Frydenberg's still continuing "generosity"!?) have only very recently started to recover well.....28% profit is feasible if one bought 'em @ lowest prices.
    susieb
    28th Jun 2020
    1:58am
    I advice anyone trading with any of these new forex or binary option companies to withdraw their funds fully after making your first profits. I have been scammed badly by several binary option companies. But I’m glad today cause I have had all my money returned plus my profits. Thanks to an expert. You can reach me to also relate for help if you’ve also lost money trading susiebell2009 at gmail dot com
    Maggie
    28th Jun 2020
    7:35am
    Somehow I think this smells of advertising/scam.
    If susieb didn't learn from "her" first experience of losing money, she's not very bright is she?
    Anonymous
    28th Jun 2020
    8:21am
    Is that a toilet roll holder on her left?
    Maggie
    15th Sep 2020
    6:17pm
    There's a Richard Smith claiming to help get your money back amongst this correspondence. Avoid him like the plague!


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