Investing via online channels is increasingly popular. There are many advertisements related to investment on the internet and social media. Some of them are from legitimate investment firms but some may be traps, like fake investment sites/mobile apps, imposter websites, unlicensed entities, etc. Investors may fall prey to these traps if they are not careful. How should we identify whether an investment firm is legit or trying to scam you?
1. Check the firm’s license
In Hong Kong, an entity that operates securities and futures businesses (such as stocks, futures, options, funds, bonds, structured investment products and leveraged foreign exchange etc.) must obtain a license from the Securities and Futures Commission (SFC); otherwise, the operation is illegal. These entities must have the relevant qualifications and meet specific requirements before they become licensed. They must also be continually regulated by the SFC. Therefore, when investors choose an investment firm or an intermediary, the first step is to find out whether the firm has obtained the relevant licenses or registrations.
This can be checked by visiting the Public register of licensed persons and registered institutions on the SFC’s website. Simply input the firm’s name to find out whether it is licensed. But even if you can find the company name on the Register, you should still be cautious that fraudsters may pose as licensed firms to deceive investors. You can take further steps to check the domain name, web design and content to see if they look proper and professional. You can also contact the firm by email or phone according to the information on the SFC Public Register or visit the firm in person to verify whether it is a legitimate entity.
If you have been approached by an unlicensed company or a suspicious website, you can file a complaint using SFC’s online complaint form.
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Additional considerations for overseas companies Investors can contact overseas investment firms easily via the internet. If you would like to invest through an overseas firm, apart from checking whether it holds a license issued by the relevant overseas regulators, you should also carefully consider the cross-border risks. As investors are physically in Hong Kong, making complaints or seeking assistance overseas may be difficult and inconvenient. If the firm closes or ceases operations, investors may be fighting an uphill battle in submitting claims and seeking legal remedies. |
2. Verify against the Alert List
The SFC website maintains an Alert List of unlicensed entities and suspicious websites. These entities are believed to be, or to have been, targeting Hong Kong investors or claim to have an association with Hong Kong. The Alert List aims at providing an early warning service to investors but it is not exhaustive. The SFC will continue update the list.
3. Stay vigilant with “low risk and high return investments”
Scammers have endless tricks up their sleeves, but they often target investors seeking high returns. One should remember that investments promising high returns at low risks simply do not exist. Generally speaking, the higher the potential returns, the higher the risks. Besides, one should not blindly believe a friend’s recommendation, especially if this comes from someone you just met or an online acquaintance. Also, your friend may as well be unaware of falling victim to a scam.
4. Be careful with virtual asset frauds
In recent years, the number of virtual asset-related frauds have been on the rise. Virtual assets are emerging products which the public may not fully understand their nature, risks, operation and trading methods. Scammers are quick to take advantage of the situation in fabricating their investment swindles. Learn more about virtual asset scams.
Always do your own research before investing and choose a licensed and reputable investment firm or intermediary. What’s more, stay alert and beware of scams. If you suspect you have fallen victim to fraudsters or have enquiries about scam cases, contact the Hong Kong Police’s Anti-Deception Coordination Centre hotline on 18222 for help.
