It is almost inevitable that despite the ongoing hard work by the FCA to protect customers against ruthless and reckless “investment advisors”, the number of financial scams will continue to rise over the next couple of years.
It is certainly going to be an interesting space for insolvency practitioners who can utilise the powers granted to them under the Insolvency Act 1986 to claw back funds for the victims who usually end up as unsecured creditors of failed schemes. This may also include a significant rise in offshore litigation, with insolvency practitioners seeking recognition in other jurisdictions where investors’ money has been shifted offshore.
Any potential investor should undertake proper due diligence when preparing to make an investment. In the event that the purported investment advisor is not willing (without reasonable grounds) to provide certain information to allow the investor to conduct their due diligence, then this is a potential red flag. In addition, any above market expected returns should be treated with caution, as should, promises of “low risk, high return”. When it seems too good to be true, then it often is.
Should an investment already be made and red flags are starting to appear, it may be worth alerting the FCA and seeking professional advice.
The FCA said it also continued to alert the public to scams, with a record 1,300 warnings issued over the past year and revealed its contact centre prevented £4m being lost to scams in 2021. Furthermore, the regulator has secured £5m to be paid back to people who invested in companies that were not authorised to undertake financial activity and a further £28.5m was frozen due to FCA action to be paid back to investors, subject to the outcome of legal action.
