Don’t be a victim! National watchdog warns investors of dodgy bond scams

Jan 29, 2021
An official scam alert has been issued for Australian investors. Source: Getty.

The national financial watchdog has warned investors of a rise in fake bond investment offers that see scammers pretending to have ties to well-known financial service firms that offer up high yield bond investments.

The warning came after the Australian Securities and Investment Commission (Asic) became aware of two scam operations that were targeting investors in Australia and around the world. The scams are triggered when investors fill in online enquiry forms to express interest in receiving investment advice, often via a third party or comparison site.

Scammers then deploy a range of tactics which involve sending professional-looking, but completely fake, prospectuses with unrealistically high returns, claiming that bonds are issued by prominent financial services when there is actually no underlying investment and lying about investor funds being pooled to invest in government or company bonds with AAA credit ratings.

They also falsely claim that the purchase price of the bonds are protected under the Financial Claims Scheme (which is the government guarantee that protects financial institutions) before taking investors’ contact details and making unsolicited calls to pressure people to invest now or risk “missing out”.

Asic also warns that those who invest in the bogus bonds are often asked to transfer money into a bank account, which is harder to recover lost funds from, especially if the scammers are based outside of Australia, meaning it’s likely to be permanently lost.

Asic acting chair Karen Chester urged investors to keep their wits about them and be wary of claims that appear “too good to be true”.

“Interest rates globally are currently extremely low, and expected to remain so for some time. If you see or receive offers of high yield bonds, they are either high-risk or they may simply be bogus and a scam,” she said. “Investors searching for income-generating investments are at risk of being duped into buying these imposter bonds. Any prospectus offering incredible returns in the today’s economic environment is likely to be just that: incredible. Asic warns investors to be sceptical and make proper inquiries before investing.”

The bogus bonds are reportedly stealing millions of dollars from the pockets of local investors, but that’s not all. Chester also says victims are at risk of identity theft when handing over details to third party sites.

“We remind investors to check that they are actually dealing with the company they think they are dealing with. Do not share personal information online unless you can verify who is using the information and how it will be used. We are seeing a rise in suspicious websites that are simply lead generators for scammers.”

Before sharing any personal details with websites or sending through funds, investors are warned to check Asic’s offer notice board, which registers current dodgy offers as well as the register of Australian financial services licensees to ensure any party that’s promoting or issuing a financial product is actually authorised to do so.

Investors should also check Asic’s list of companies investors shouldn’t deal with as well as look over the main website of the bond issuer to see if there are alerts about imposter scams, and finally, seek independent financial advice.

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