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How to avoid an investment scam

The Momentum UK Team 15 January 2014

For many of us, the world of investments can be confusing and daunting. Unfortunately, there are scammers out there who will try to use this to their advantage. Among others, graphene scams have been in the news recently, with fake brokers pressuring consumers to invest in this high risk commodity. Here are our top tips for spotting a scam, and what you can do if you think you’ve been affected.

Watch for the signs

If you know what you’re looking for, it can be easy to tell when you’re being approached by a scammer. The most obvious sign is a cold call; legitimate investment firms aren’t allowed to make cold calls or use high pressure selling tactics, so if this happens you’re almost certainly talking to a scammer. If the line sounds fuzzy or there’s a lot of noise in the background, this could be another sign that the firm calling you isn’t trustworthy.

Scammers’ favourite phrases

There are a few phrases that many scam artists seem to have in common, and should set your alarm bells ringing:

  • “Hello, how are your investments doing lately?”
  • “There’s a huge Chinese demand for [the investment]”
  • “It’s such a good deal I’ve invested in it for my Granny/children”
  • “I’m giving you some insider information/trade secrets”

As ever the Golden Rule is: if it sounds too good to be true, it probably is.

Checking whether a company is legitimate

If you’ve been offered an investment opportunity from a company you’re not sure about, there are some easy ways to find out whether they’re for real:

  • Look them up on the FCA register - if they’re not on it, they’re not regulated
  • Have a look at their online presence - they might have a flashy looking website, but if there’s no address or phone number it could be a scam. If there is an address, try looking it up on Google Street View
  • Check whether they’re a real company using the free WebCheck service at Companies House

Important things to remember

  • If you’ve been the victim of a scam in the past, the company is likely to have sold your details on to others so stay vigilant
  • If you give any of your money to a firm that isn’t regulated by the FCA or is based abroad, you won’t be covered by the Financial Services Compensation Scheme or have access to the Financial Ombudsman Service
  • If you think you’ve been the victim of an investment scam or approached by a fraudster, call the FCA Consumer Helpline on 0800 111 6768 and report the company to prevent others from falling into the same trap
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