Spot the signs of an investment scam

How to spot the signs of an investment scam.

Spot the signs of an investment scam

“If it sounds too good to be true, it probably is.”

When it comes to investments, this saying certainly is true. If an opportunity emerges from out of the blue, promising high returns and low risk, it is likely to be a scam. However, phony investments are often so slick and convincing that the fakes can be difficult to spot.

According to the Australian Securities and Investments Commission (ASIC), there are three main types of investment scams:

  1. The investment officer is totally fictitious and does not exist.
  2. The investment offer exists but the money you pay is not going towards it.
  3. The scammer falsely claims to represent a well-known investment company.

Such offers usually claim to be low-risk, with insurance and exit strategies to sweeten the ‘deal’, and often coinciding with quick, high returns and other benefits. These scams can involve shares, mortgages, real estate, option trading, foreign currency trading and offers of inside information. They are often conducted from overseas through fake websites – the really sophisticated operations go to great lengths to be convincing, sometimes going as far as issuing online press releases and providing user logins for victims to view fake balances and expanding returns.

Warning signs
ASIC recommends potential investors watch out if the person making the offer:

  • doesn’t have an Australian Financial Services licence or says they don’t need one
  • contacts you multiple times and tries to keep you on the phone
  • says you need to make a quick decision or you will miss out
  • claims they are a professional broker or portfolio manager, but is actually following a script
  • offers you access to exotic or unusual ‘investments’
  • claims to represent or be associated with a reputable organisation to gain credibility e.g. NASDAQ, Bloomberg
  • provides glossy brochures, certificates and receipts, or directs you to a flashy website.


Other red flags include unverifiable claims, lack of transparency,

If you encounter any of these signs, it is best to hang up the phone or ignore the email. Legitimate professionals will not harass or attempt to mislead you with vague information and ‘style over substance’ – hollow words are just that, so be careful not to believe the sales pitch.

For more information and advice, visit ASIC’s MoneySmart website.



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    28th Feb 2020

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    Old Geezer
    15th Jul 2016
    Make sure before you invest in anything there is another fool prepared to pay more for something than you will. There has to be fool mightier than though.
    15th Jul 2016
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    15th Jul 2016
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    15th Jul 2016
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    15th Jul 2016
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    16th Jul 2016
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