by Eulana Weekes
St.Kitts and Nevis (WINN): During the height of the COVID-19 pandemic, there was an upsurge in investment scams. People were being promised easy returns and in some cases people lost much of their investments and sometimes all of the money invested.
Speaking on the October 12 edition of ECCB Connects, Chief Executive Officer of the Eastern Caribbean Securities Regulatory Commission ( ECSRC), Alousia Faisal, advised prospective investors on the key indicators to determine whether an investment offer is legitimate.
Faisal said, “In most cases, the ECSRC will approve the documentation related to a specific security’s investment. Let me tell you what I mean. If a company wants to offer shares to the public or to sell shares to persons, they will have to first submit a prospectus to the commission for approval, and that prospectus will outline information about the shares, about the company that is important for the prospective investor. So if someone comes to you and they are selling you shares in the Eastern Caribbean securities market, you must first ask for a prospectus because that is a very important document that is required by law for any type of offer of shares, especially if it is being done publicly.”
With the increased global connectivity, investors are targeted digitally with offers from around the world. In these cases, Faisal suggests that research be carried out on the company through the securities regulator in the company’s district.
“We would advise that you do research; you research the company on the website of the Securities regulator in the jurisdiction where that company is located. For example, if a company is in the U.S, claims to be operating from the U.S or maybe the U.K, and they are offering to sell you investments, first of all, you can go on to [the] websites of the regulators in the U.K and the U.S to check if that company is actually bonafide and registered to them or whether they have some sort of association with those regulators in that jurisdiction.”
The ECSRC has on its website a list of all companies in the Eastern Caribbean that are licensed by the Commission to participate in the securities market, as well as a list of persons or individuals who are associated with such companies.
Meanwhile, a scammer will likely use varying strategies, whether by deception, bribe or any illicit means to attract individuals. Faisal said it is often vulnerable investors who get caught up in scams.
“The ordinary scammer will employ a number of tactics to get at vulnerable investors. These are persons who they believe do not know very much about investing and are not financially salvaged. They may tell you that you will get a lot of money, that you will get wealthy very quickly. They also tell you that they are very knowledgeable in investing and investments and they are associated with a very reputable firm that you [in which] they themselves have invested in, and so they encourage you to also participate. We also have the tactic way; persons would tell you if you invest, you can get a certain percentage of the commission, or they offer you something in return for your investment upfront, and that is one of the signs as well of an investment scam.
In addition, Faisal shared, “One of the very common forms of investment scams is that they try to encourage you to invest very quickly and tell you that you must invest now because there is a limited supply. So, for example, if there is a security or share or some sort of stuff that is being offered to you, they tell you to buy it now because there is a limited supply.”
Faisal said all investments are risky, and when an individual is approached about partaking in an investment opportunity, they should be advised of the risks.
“If somebody tells you if you invest your money with them, they will guarantee you they’ll make a return, that is a red flag. There is no investment that has no risk. All investments are risky, and they should tell you upfront what the risk is.”
An investment scam is when someone offers you a false but often convincing opportunity to make a profit after investing a sum of money.