If something is too good to be true, it probably is!

We urge all consumers to be cautious about high pressure sales pitches or promises of unusually high returns. If a product or scheme sounds too good to be true, it probably is.

For instance, if returns are largely being paid from new fund inflows, this might be  an indicator of a potential Ponzi style scheme. Ponzi schemes are investment schemes involving fraudulent misrepresentations to investors and returns are paid to investors entirely out of the incoming funds of new investors entering into the scheme. They can grow rapidly and continue for some time until the flow of new funds start to dry up. Such schemes are not regulated by MAS.

Another example would be lottery scams where fraudsters inform consumers that they have won prize money in an overseas lottery and ask consumers to pay large up-front payments such as taxes or fees for the administration and transference of funds.

If you choose to invest in unregulated schemes, note that:

1. such schemes do not come under MAS' purview and are not subject to MAS' regulations; and
2. persons who offer such schemes may not meet fit and proper requirements as set out under MAS regulations.

MAS aims to safeguard the interests of retail investors by requiring:

1. regulated persons and the schemes they offer to comply with business conduct standards; and
2. regulated persons to be fit and proper.

MAS does not and cannot protect consumers from the risk that their investments will not deliver anticipated returns. Investors should take responsibility for their own investment decisions. All investment comes with risks. The higher the potential returns, the higher the risk. If something sounds too good to be true, it probably is.

MoneySENSE has set out some key questions you should ask before you hand over any money.

1. Is the product/ scheme / provider regulated? 
   [Note: A list of financial institutions regulated by MAS is available in the Financial Institutions Directory at www.mas.gov.sg.  A list of entities that are not authorised by MAS to conduct regulated activities is available in the Investor Alert List at www.moneysense.gov.sg]
2. What are the returns dependent on?  Is the return being paid from new inflows of money or from returns from actual investments? 
3. When will the returns be paid?  What is the amount?  How much is guaranteed?  Who provides the guarantee?
4. How long must I stay invested?  What happens if I want to withdraw my money?  What are the penalties, restrictions and procedures?
5. How can I monitor the performance? What reports and updates will I receive? How often will I receive these reports and updates?

Refer to the following consumer alerts for more information:

• Pitfalls of Dealing With Unregulated Persons  - which provides tips on how consumers can protect themselves against unregulated persons. The alert advises consumers to: (i) deal with regulated persons; (ii) find out as much as possible about the firm and its staff; (iii) understand the product they are buying; and (iv) ensure that the investment fits in with their financial goals. 
• Protect Yourself Against Bogus Investment Opportunities  - which provides information on common scams and tips on how consumers can protect themselves from falling prey to such schemes.