ASIC is warning investors of a rise in imposter bond investment offers. Scammers pretend to be associated with well-known domestic and international financial service firms and offer high yield bond investments to investors. ASIC has recently become aware of two such scam operations targeting investors in Australia and others in countries such as the UK.

In many circumstances, the scam occurs after the investor completes an online enquiry form expressing interest in receiving investment advice, often via a third party or comparison site.

Some of the common tactics deployed by scammers include:

• sending professional looking fake prospectuses with unrealistically high returns;
• falsely stating the bonds are issued by prominent financial services firms when this is not true and there is no underlying investment;
• falsely claiming investor funds will be pooled to invest in government bonds or the bonds of companies with AAA credit ratings;
• falsely claiming the purchase price of the bonds is protected under the Commonwealth Governments Financial Claims Scheme; and
• using contact details gathered online through fake investment comparison websites to call people and pressure them to invest or risk ‘missing out’.

When individuals decide to invest in these bogus bonds, they are directed to pay funds into a bank account. It can be difficult to recover money lost to scams, especially if the scammers are based outside of Australia, and the funds may be permanently lost.

ASIC Acting Chair Karen Chester urged investors to be wary of claims that are ‘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,’ Ms Chester 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.

‘These bogus bond funds are raising not thousands, but millions of dollars from Australian investors.

‘Ensuring investment products are true-to-label is front and centre for ASIC. While 'true to label’ covers all aspects of the investment product being offered, the foundation stone is basic truthfulness, and none more so than that the product issuer is actually who they say they are. This conduct is beyond not being true-to-label; it's bogus-to-label.’

‘Investors are also at risk of identity theft. 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 investing, Australian investors can and should avail themselves of these simple practical checks:

• check ASIC’s Offer Notice Board to see if a prospectus relates to a recent offer registered with us;
• check ASIC’s register of Australian financial services licensees to make sure any party promoting or issuing the financial product is licensed or is authorised by a licensee;
• check ASIC’s Moneysmart list companies you should not deal with;
• check the main website (i.e. the homepage) of the purported issuer of the bonds to see if there are any alerts about imposter scams; and
• seek independent financial advice.

Background

If you think you or someone you know has been scammed, lodge a report of misconduct with ASIC and report the matter to police. You can also make a report to the Australian Cyber Security Centre at ReportCyber. Your report may disrupt the scammers and hopefully will warn others to avoid it.

For more information about investment scams, visit ASIC’s Moneysmart website.