SEC warns of scammers
Sri Lanka is very susceptible to a lot of problems without a proper legal system to outlaw questionable corporate behaviour. The latest is the high risk of financial scammers. Take the Securities and Exchange Commission (SEC) notices recently.
In a cautionary statement, the market regulator warned the public recently on the growing number of unsolicited phone calls from firms requesting investors to buy shares of companies traded on offshore jurisdictions.
After this, many have alerted the regulator that they too got these types of calls with a promise of guaranteed high returns of as much as 20 per cent. The SEC said that it is the apex regulator of the Capital Market in Sri Lanka and legally empowered only to issue licences to stock broker firms to operate in Sri Lanka. The SEC further stated that it does not grant licences to agents to operate in other jurisdictions or act as agents of international stock broker firms. The calls came to different persons from six different firms in Colombo.
What is missing is that the SEC or anyone else for that matter cannot ban these companies. Why? Because they don’t have the authority to do so and these companies aren’t doing anything illegal. Since exchange controls were relaxed, monies can now be invested abroad. So what can the authorities do? Issue notices.
Smell a rat?
Well, being aware that someone may be trying to take advantage of you is usually the best defence. Once the con has been put in motion, it is often difficult or impossible to recover what has been lost. So, spotting the trickster before falling victim to his ploy is the best option. Which is why the notices.
SEC officials told the Business Times that they got calls during the past few days from many who had received calls from persons claiming to be agents of international stock broker firms, offering to facilitate their investment in foreign firms. Some complained that they lost millions of rupees during the last two years to such scams. A businessman from Tissamaharama lost Rs. 27 million six months ago. The regulator or those who got calls don’t know how the callers get the phone numbers to make calls. Changing technology and rapid flow of information have placed the customer at the centre.
An SEC official said that these callers claim what they are offering is low-risk and will provide you with quick and high returns, or encourage you to invest in overseas companies. “The offer will sound legitimate and they may have resources to back up their claims. They will be persistent.
Investors need to be more careful and vigilant, as callers have been using more varied and more sophisticated tactics,” he added. The list of stock broker firms licensed by the SEC is available on their website, www.sec.gov.lk or the website of the Colombo Stock Exchange, www.cse.lk.
The official also warned to beware of investment opportunities that offer low or no risk with a high return or are advertised to be “guaranteed” to do well. High-pressure sales tactics are also a warning sign. “Many risky investments are solicited to consumers in high-pressure situations and consumers are encouraged to act fast before the opportunity is missed. Remember, if it sounds too good to be true, it probably is,” he added.
Also ‘now’ is the time to bring in laws and ‘actually’ regulate.