When strangers call bearing investment gifts: hang up

Media release
MR No. 2016 – 33
15 November 2016

Cold calls from strangers about investment opportunities are not only sure-fire losers, but illegal, and the Financial Markets Authority says the best response is the dial tone.

As part of International Fraud Awareness Week, the FMA is warning consumers to be aware of fraudsters and protect themselves, having noticed an increase in cold-calling and ‘boiler-room’ scams.  These scams are not just affecting first-timers but professional, experienced investors.

Paul Gregory, Director of External Communications and Investor Capability, says “These crimes are much more prevalent in New Zealand than people realise and scams really can happen to anyone.  John is an experienced investor we know of who got caught out by sophisticated fraudsters and lost over US$40k through a share scam.” 

New Zealanders have lost millions of dollars through cold-call scams, sometimes known as ‘Boiler room’ scams.  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. 

Gregory also notes “Often the deals through cold-calls and boiler-rooms sound too good to be true. We recommend when considering any investment make sure you do your research, deal with a licensed provider and talk to an adviser if you need to.”

Bronwyn Groot, from BNZ’s Financial Crime and Security team, recently shared some customer examples with the FMA and confirmed just how sophisticated the new breed of scams is.

“These scams take fraud to a new level – they are incredibly slick operations that target informed, high-value investors. The money loss is huge, around half a million dollars in just one case alone.”

Ms Groot says a red flag with this new operation is that it was a pressured sale – much more so than is allowed here in New Zealand and urgent sales tactics should automatically set off alarm bells.

“If you’re not sure, do your homework. Check out the broker, call your bank or the FMA and see if this is a known scam,” says Ms Groot.

Protect yourself against fraud

Fraud comes in many guises but the best way to protect yourself against a scam of any kind is to follow these tips:

• If you receive a call about a financial offer, hang up. Never share personal financial details with someone you don’t know.
• Only deal with a registered AND licensed financial provider.  If they are licensed in New Zealand, you have more protection if something goes wrong.
• Do your research when making any investment – is the company legitimate? Does the investment sound too good to be true?  If you are still not sure, talk to an adviser.
• If your bank or financial provider contacts you as they believe you may have been a victim of fraud, listen to them as they are likely to have had other customers affected. Do not transfer any more money.
• Check that the company you are dealing with is not on the FMA website’s warnings and alerts list.
• For more information on how to avoid scams, visit http://fma.govt.nz/consumers/avoid-scams/

ENDS

Contact:
Andrea Birtwistle
Ph: 021 847 192
[email protected]