05-255 ASIC warns on illegal investment schemes worth $220 million
Tuesday 30 August 2005
The Australian Securities and Investments Commission (ASIC) issued a warning to investors today after revealing a 25 per cent increase in actions to close down illegal investment schemes over the last financial year.
ASIC closed down illegal investments involving more than 2,150 investors who invested a total of around $220 million in the past financial year. ASIC closed down 76 schemes and obtained protective court orders in many other matters pending further action. A further five promoters of illegal investments are serving jail sentences, imposed in the 2004–05 financial year, for dishonesty associated with the investments they offered.
ASIC Commissioner Professor Berna Collier said illegal investment schemes were a serious problem in Australia, and generally a sure-fire way to lose money.
‘Schemes established specifically for scamming investors, such as short-term unsecured loan investments, and investments promoted through contacts made at “get rich quick” wealth creation seminars, or via the Internet, are of real concern’, Professor Collier said.
Illegal investments range from outright scams to investments that suffer from technical non-compliance and do not have any of the basic safeguards for investors required under the law. Illegal investments are generally those where the promoters and managers of investors’ money do not hold an Australian financial services licence and they may have also failed to register the scheme with ASIC or made the required disclosures to investors in circumstances where they are legally required to do so.
‘Illegal investment schemes are often marketed as unique and exotic opportunities, through social and cultural networks and by word of mouth’, Professor Collier said.
‘Victims lured to highly risky schemes on the promise of high returns range from retirees who have invested their entire pay-outs and subsequently lost the lot, to people who have sought a quick return on their capital after selling their home before purchasing the next.’
‘Any investment carries risk, however investing in an illegal scheme is a long way from depositing funds with a bank, for example. Consumers often lose funds because they are willing to hand over money, on the basis of a perception that the money can’t be lost’, Professor Collier said.
‘ASIC has and will continue to shut down illegal schemes and prosecute their operators but the best protection is for investors to avoid them. An informed investor is one of the best protections against illegal schemes’, Professor Collier added.
There are eight key questions that people should consider before investing:
- Does the company or person advising you hold an Australian financial services licence? Is the company licensed to sell this product?
- Is there a prospectus or a product disclosure statement?
- What is the expected annual return? Does it sound too good to be true?
- Are all your eggs in one basket?
- What is the reputation of the salesperson and scheme manager?
- What will your expenses be?
- Can you get your money back if you need it?
- Have you done your homework and fully understand the investment?
In the 2004-05 financial year, ASIC’s actions resulted in the following people being jailed:
Bo Long Group of Companies Two company directors, Ms Donna Tung Sing Ho and Mr Mark Sweeney were sentenced to nine years in jail, and eight-and-a-half years in jail, respectively, for their roles in an illegal investment scheme in which people invested a total of $6.7 million on the pretext that it would be used for various projects in mainland China. Mr Sweeney has a current appeal before the courts.
Mr Andrew James McKenzie Four year jail sentence imposed on a North Queensland former accountant, Mr Andrew James McKenzie who dishonestly applied almost $1 million in funds raised from investors for unregistered syndicated property unit trust investment. The offences were discovered after the trustee companies were wound up.
‘Nigerian scam’ and Mr Robert Andrew Street A former financial adviser, Mr Street was sentenced to five years and three months in jail for promoting illegal investments in various projects while actually placing around $1 million of his clients’ funds in a ‘Nigerian scam’.
Financial Options Group Incorporated (FOGI) The former managing director of an unlicensed financial services business, Financial Options Group Incorporated, Mr Robert Geoffrey Walker, was sentenced to seven years in jail on fraud charges for making false statements to investors about returns from their investments. The investment scheme offered interests in non-regulated foreign exchange and base metal markets.
And since the end of the 2004-05 financial year:
Elizabeth Heather Parry The accountant was jailed for 10 years in the Cairns District Court following a joint investigation by the Queensland Police Service and ASIC. Ms Parry pleaded guilty to fraud charges. She will be eligible for parole after serving four years. Ms Parry, who operated a Cairns-based accounting practice, obtained approximately $6 million in loans from private investors who were guaranteed returns between nine and 15 per cent per annum, and used the funds for her own purposes.
More information about illegal schemes is available from ASIC’s consumer website FIDO at www.fido.gov.au or by calling ASIC’s Infoline on 1300 300 630.
End of release
More about illegal investment schemes on our consumer website FIDO
ASIC Website: Printed 07/05/2009
