Advisers told to warn clients off cold-callers

Advisers’ clients are particularly vulnerable to illegal cold callers offering scam investments, the Financial Markets Authority has warned.

Tuesday, November 15th 2016, 6:00AM 3 Comments

by Susan Edmunds

The FMA has received 25 complaints about cold callers over the past four months, the same number as was received over the previous 12.

It is warning that investors need to be aware of the potential for loss – and that the scams were not just targeting newbie investors but experienced, professional investors.

“The fact that there appears to be an element of cherry picking means it’s possibly more likely that the people who get stung have an existing adviser relationship,” said the FMA’s director of external communications and investor capability, Paul Gregory.

He said the amounts reported as lost varied between $4000 and $700,000.

These operations, set up by a team of fraudsters in makeshift offices overseas – beyond the FMA’s reach – offer non-existent, worthless or overpriced investments. They mostly sell shares but the FMA is also aware of FX trading, binary options and sports investment schemes being sold in this way.

Bronwyn Groot, of the BNZ’s financial crime and security team, said the schemes were slick operations that targeted informed, high-value investors.

But she said a red flag was that they were usually pressured sales.

Gregory said advisers need to make their clients aware of the potential for a scam. “Advisers have an educational role. It’s illegal to cold call and the results are generally poor.”

He said the FMA was aware it was the tip of the iceberg when it came to reports of scams. “These crimes are much more prevalent in New Zealand than people realise and scams really can happen to anyone.”

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Comments from our readers

On 15 November 2016 at 9:32 pm NormanStacey said:

What an unusual comment, “The fact that there appears to be an element of cherry picking means it’s possibly more likely that the people who get stung have an existing adviser relationship,”.
I'd have thought people with an AFA would be less vulnerable.
More likely bunnies thinking the FMA are guarding the patch are most vulnerable.

On 16 November 2016 at 9:29 am Dirty Harry said:

Just like all the people who lost money in fincos were experienced, professional investors with adviser relationships?

On 17 November 2016 at 8:41 am Backstage said:

I get tired of hearing from those who are not advisers telling us what our role is. I am not able to control human behaviour that well and hope clients have some intelligence. I do not work in investment but 3 years ago heard an ad' on radio live regarding a company advertising currency trading. I called and enquired and interviewed the advertiser as was curious about the claims. After several phone conversations i contacted the commerce commission encouraging them to listen and probe. I was told unless they had a complaint they could do nothing. Well that company has stopped advertising and several investors did get hurt... the commerce commission after this started investigating but that was to late... investors will not get a remedy it transpires the fellow that was advertising has done this in several countries.

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