Dealing with Unregulated Persons
This guide discusses the common techniques used by unregulated persons to solicit financial products and services and what could happen if you deal with them. It also provides tips on how you can protect yourself.
The following case story of how a "Mr Michael Ang" fell prey to the marketing gimmicks of an unregulated person is based on a complaint to the Monetary Authority of Singapore (MAS). The names of the parties involved have been changed to preserve confidentiality.
In March 2003, Mr Michael Ang received a telephone call from a Mr David Wilson. Mr Wilson claimed to be a representative from Bonus Asset Management, an offshore investment company with a representative office in Singapore and offices worldwide. After listening to Mr Wilson's sales pitch for half an hour, Mr Ang agreed to invest $10,000 in shares of a US company, Pluto Inc. He was taken in by Mr Wilson's knowledge of investments and his claims of being able to make quick gains for his clients through investments in the stock market. Mr Ang trusted Mr Wilson's recommendation and did not check the background of Bonus Asset Management or Pluto Inc.
Two months later, when Mr Ang wanted to liquidate his investment because of cashflow problems, he was persuaded by Mr Wilson to invest $10,000 in the shares of another company, HumanTech Inc. Mr Wilson promised to sell Mr Ang's Pluto Inc. shares after he had bought the new shares. When Mr Ang did not receive his sales proceeds after one month, he called Mr Wilson. Despite repeated calls over a two-week period, he did not receive any response from Mr Wilson. Mr Ang reported the matter to the Police and the MAS, and found that Bonus Asset Management was not licensed or exempted by the MAS to deal in investments in Singapore.
Why should consumers not deal with unregulated persons?
Consumers are strongly encouraged to deal only with persons that are regulated by MAS. MAS' regulatory regime aims at safeguarding the interests of consumers by ensuring that only competent and professional persons may provide financial services. The laws administered by MAS also require disclosure of information on investment products being recommended to consumers. If a consumer chooses to deal with persons that are not regulated by MAS, he forgoes the protection afforded under laws administered by MAS, particularly if these persons are based overseas.
What are the common techniques used by unregulated persons to solicit business?
A cold call is an unsolicited sales call offering investment products, usually over the telephone. Cold calling by unregulated persons to market financial product and services in Singapore is illegal.
Emails or bogus Internet websites
Beware of investment opportunities you learn about from the Internet. If you come across an offer for a financial product or service on the Internet or through email, check whether the product is properly registered and the persons marketing the product are regulated.
What are the telltale signs that you may be dealing with an unregulated person?
There are usually telltale signs that warn you of the possibility that you may be dealing with an unregulated person. Watching out for these signs could save you from problems later on:
- Investors are usually contacted by telephone or by unsolicited emails or facsimile. All subsequent contact is usually through the same medium. There is seldom any face-to-face meeting. Even if there is, the meeting is usually conducted in a location other than a proper office.
- High-pressure sales tactics are used to persuade you to invest before you have the opportunity to think about the investment product or to conduct checks on the person offering it. Claims of a "once-in-a-lifetime opportunity" or a "limited time offer" are common.
- The sales representatives will claim to have inside or confidential information that will generate a windfall from investing. There will usually be promises of high returns, "guaranteed" profits and quick gains. More often than not, these sales representatives are smooth-talkers who give the impression that they are very knowledgeable about investments.
Tips to protect yourself against unregulated persons
Deal only with regulated persons
To protect your interest, deal only with representatives listed on MAS Register of Representatives. If the caller insists that he is authorized to operate in Singapore, ask for proof and conduct the following simple checks:
- Financial Institution Directory
A list of financial institutions regulated by the MAS to operate in Singapore can be found on the MAS Financial Institution Directory. After you have found the entity in the Directory, be sure to note what activities it is authorised to conduct in Singapore. MAS only regulates persons with a presence in Singapore.
- The Investor Alert List
The Investor Alert List is a list of unregulated persons who, based on information received by MAS, may have been wrongly perceived as being licensed or authorised by MAS. It includes those operating in Singapore as well as those based overseas. However, you should bear in mind that this list is not exhaustive. You may wish to check the Financial Institution Directory found at the MAS website to determine if the person you are dealing with is in fact regulated by MAS.
- MAS Register of Representatives
The MAS Register of Representatives consists of names of representatives appointed by the financial institutions (banks, insurers, holders of capital markets services licenses or licensed financial advisers). These representatives have been certified by the FI to be fit and proper; met the competency, financial soundness and integrity standards required under the SFA and FAA and in accordance to MAS' fit and proper guidelines. Consumers should always request for the representative number of the person they are dealing with to conduct their own checks on the MAS Register of Representatives.
Find out as much as you can about the firm and its staff
Ensure that you do all necessary checks before dealing with any person offering financial products and services. Find out more about the firm, its track record and the background of the key people running the operation. Make it a point to meet with the representatives.
Understand what you are buying
Do not get carried away by a good sales pitch or promise of high returns. Always ask for brochures and documents to be sent to you so that you have sufficient time to establish the facts, review the product and make an informed decision. Do not sign on blank forms without understanding what you are signing. Never give your identity card to someone you do not know or without first clarifying why it is needed.
Make sure that the investment fits in with your financial goals
Before you make an investment, consider if it matches your financial goals, risk profile and personal circumstances. You should not make a hasty decision when it comes to investments. Remember that all investments have an element of risk, and a higher return is almost always accompanied by higher risks.
What should I do if I receive an unsolicited sales call from an unregulated person?
If a person approaches you to offer financial products and services and you believe he is not authorized, you should report the matter to MAS immediately. You can contact MAS through telephone, email or letter as follows:
Monetary Authority of Singapore
Consumer Issues Division
10 Shenton Way
Tel: (65) 6229 9081
Fax: (65) 6225 9766
MAS may take regulatory or other enforcement action if warranted. Where there has been a breach of the law, MAS will refer the case to the Commercial Affairs Department (CAD) for investigation.
If you would like to find out more about boiler rooms and other investment scams, please refer to Commercial Affairs Department's Crime Prevention Advice page.