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.



    To make a comment, please register or login
    15th Jul 2016
    Vote Liberal is the Only one I know !!:-( :-(
    15th Jul 2016
    Parti how about the union paying for Shortens Mrs wardrobe some $140000.00 I believe she still looked like a bag of chaff tied in the middle.

    15th Jul 2016
    Now how about we all buy an emu or ostrich egg for about $60000.00 each and we will have an ostrich and emu farm for you all to look at, mind you every investor is looking at the same two ostriches all at different times and as well we will set up an abatoir to process there oil and feathers and as I get your $60000.00 I'll have a damm good laugh because you are going to lose the lot.

    This actually happened many years ago and everyone lost I know of several schemes like this.
    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
    Give them the PMs Phone Number !! :-) :-)
    15th Jul 2016
    I just won a one hundred million dollar lottery in Nigeria and I didn't even buy a ticket. Shows how little you know. Well I'm off to have a great holiday. Bye
    15th Jul 2016
    The last time I had that much to spend I was playing Monopoly !! :-(
    15th Jul 2016
    Anyone who responds to an unsolicited 'offer' by e-mail or cold canvass phone call deserves what they get! An empty bank account.
    Young Simmo
    16th Jul 2016
    I have a special way of treating the unsolicited phone calls. About a year ago I went to a sports store and bought a Extremely High Frequency whistle. When I get those turkey phone calls, I talk for a few seconds and then give them the best blast I can manage. I just hope they are using ear plugs or at least head phones. I have to tell the Mrs to put her fingers in her ears first.