How to spot an investment scam and what to do before you invest

Protecting yourself against scams
December 16, 2021

How to spot an investment scam and what to do before you invest

According to Scamwatch Australia, a reported $851 million was lost to scams in Australia in 2020, with $328 million comprising of investment scams.

Investment scams aim to get unsuspecting people to hand over money. The techniques used are becoming increasingly sophisticated with fraudsters designing professional looking fake websites with real company logos, appearing knowledgeable and using testimonials and marketing material to capture personal information such as your phone, email and bank details.

Fortunately, there are ways to spot an investment scam:

How to spot an investment scam

Look out for contacts who:

  • do not have an Australian financial services (AFS) licence or say that they don’t need one
  • call you repeatedly, keep you on the phone, or email a lot
  • ask you for personal information or financial information
  • do not provide clear answers to your questions or which are not supported on their company’s website
  • ask you to open attachments or click on links in messages or emails unless you are completely certain of the authenticity of the sender
  • claim you need to make a quick decision or you’ll miss out on the deal
  • offer you high returns on your investment with little or no risk, or incentives to invest
  • offer you professional-looking prospectuses, brochures, share certificates or receipts, but their prospectus isn’t registered with the Australian Securities and Investments Commission (ASIC)
  • share fake reviews and claim other clients have invested or want in on the deal
  • invite you to investment seminars designed to promote “exclusive” opportunities offering high returns.

If you spot any of these signs, hang up the phone or delete the message or email. If you manage to record any of the scammer’s details, report them to the Australian Securities and Investments Commission (ASIC).

What to do before you invest

1. Ask questions and request information

Check the legitimacy of the person offering the investment by asking them:

  • What is your name and what company do you represent?
  • Who owns your company?
  • Does your company have an AFS licence and what is the licence number?
  • What is your address?
  • Is your investment prospectus registered with ASIC?

If they try to avoid answering these questions, their investment offer is probably a scam. Hang up the phone, do not respond to the message or email. Stop dealing with the person or delete and block them if it’s through social media.

2. Do your research on the offer

Even if the person can answer your questions, it doesn’t always mean the investment is legitimate. Don’t rely on their information, do your own research and don’t be pressured to make a quick decision you could regret later. Check:

  • ASIC’s OFFERlist database to see if the company has lodged a prospectus with ASIC
  • Publicly listed phone directories to confirm the address and contact details
  • the company’s website by searching through legitimate online information sources (without ever clicking on a message email link provided)
  • ASIC Connect’s professional register search to check the company has an AFS licence or Australian credit licence
  • ASIC Moneysmart’s list of companies you should not deal with
  • ASIC Moneysmart’s list of fake regulators and exchanges
  • the International Organisation of Securities Commission’s (IOSCO) investor alerts.

3. Get financial advice from a trusted resource

Always talk to us before you invest in any opportunity. Growing and protecting your financial wellbeing is our priority, to discuss your needs give us a call on (03) 9896 5100.

Finally, if you think you have been the victim of an investment scam:

  • Report it to ASIC or your local police
  • Stop sending money to the company
  • Be wary of falling for a follow-up scam or offers to recover your money