If it sounds too good to be true – then it probably is

2010-07-03 13:20

I have received calls from readers complaining about various

companies that trade as either stockbrokers or sell some other investment

scheme.

In most of the cases, the readers had invested with these companies

but had been unable to retrieve their money as promised.

Just a month ago I was phoned by a reader who had invested R150 000

with one such company.

When a few months later he ran into financial difficulties, he went

to the offices of the investment company to try to get his money back.

He could only get less than half the initial investment.

I would not want to hazard a guess about what penalties could have

been charged or whether market performance could be the reason for this.

In the absence of a written contract and a lack of understanding of

terms and conditions of that particular investment, one cannot comment

meaningfully.

I was prompted to write about this in the light of a warning that

came from the Financial Services Board (FSB) this week about a company called

Integrated Investment Management SA (IIMSA) operating from ­Bloemfontein and

represented by Peter Duvenage.

The FSB, which regulates the non-banking sector of the financial

services industry, says IIMSA is not registered with it and as such has been

operating illegally.

It appears the company has only submitted an application, which is

presently being considered by FSB, and it is on that basis that they have gone

­into the market place to trade.

What is surprising is that despite warnings over the years, the

public continues to be taken by offers that are too good to be true.

IIMSA promises prospective investors returns of ­between 80% and

100%. The public laps up this claim without question in spite of the turbulent

financial markets.

This, to me, highlights the generally low understanding of the

stock markets, especially among blacks.

Victims of these dodgy ­investments tend to be quick to part with

large sums but shun investment opportunities that guarantee reasonable

returns.

The point is, if you have money to invest, then surely you can

afford to make a number of calls – just to verify with the authorities the

credentials of the individuals and the companies that sell you investment

products.

A local business address should not be seen as proof of

credentials.

Go the extra mile when faced with unknown or unfamiliar

names.

I am not saying all new players are not trustworthy or will not

deliver. But any promises of unrealistic ­returns should trigger alarm bells and

a cautious ­approach.



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