CEBU, Philippines — The proliferation of investment scams and people falling into the trap can be attributed to two factors: greed and ignorance.
This according to Cebu-based stock market trader Marco Nino Velasco of Maybank ATR Kim Eng Securities.
"Greed from those who are behind these scams and ignorance of the victims," Velasco told The FREEMAN in an interview yesterday.
But how do you spot investment scams? Velasco shared some tips:
If the company is soliciting investments, check if it has a secondary license from SEC. If the company is getting money from the public and promises to give a return, it is considered as a financial security and needs a secondary license. Getting a secondary license is very hard to get and scams don't have secondary licenses.
Secondly, stay away if the company promises very high guaranteed returns. While earning 30 percent to 50 percent a month can be possible (from trading financial securities), doing it consistently is close to impossible.
People should think that if the company or a person is capable of doing it, why would they share the profits with everybody? The hassle won't be worth it.
Third, getting returns or profit from merely inviting other people to join is a very red flag. Profits should come from selling securities or providing some service, not from inviting people. The latter is a ponzi scheme.
Lastly, check the background of the people running the company. Do they have investment experience/background? It is very unusual for a religious leader to run a (as they claimed) multi-billion company. Aside from experience, also check their credentials (certifications, educational background, etc.).
Velasco said scams are built on deception while legitimate investments are transparent.
"To see if it is a potential scam or not, people should do due diligence before investing. People should know the characteristics of those scams that came and ran. It's the same scheme over and over again," the trader explained.
Velasco believes the government has a bigger role in busting down these bogus investment firms.
"If the government won't tighten its grip, I'm sure another scam will hit the Philippines in maybe five years from now and the cycle will just go on," he said.
"The government plays a big part in this. For one, these scams are all over the Philippines because the SEC (Securities and Exchange Commission) is too loose. SEC should be more vigilant and strict," the stock trader added.
Because of scams, the financial industry is being dragged indirectly. As a result, people become more hesitant to invest.
"Investments have been associated to scams because of these schemes," he said.
"The government should also provide more opportunities. Aside from greed and ignorance, one factor why these scams succeed is because people want to get more from life. If the government could provide more jobs and benefits, I think there'd be fewer victims. Scams rarely prosper in economically progressive countries because people really don't see the need in joining," Velasco said further.
He also stressed there's a need to ramp up financial education.
"People should know what are the legal investment vehicles and how to identify what is legit from potential scams," he said.
For his part, Cebu Bankers Club President Neil Darwin Credo advised the public to seek the help of licensed financial advisors when they want to invest.
Nowadays, the financial market offers various investment options for people who want to grow their money.
Would-be investors may opt to put their money in stocks, mutual funds, UITF (unit investment trust fund), real estate or even putting up a business.
He said some may also approach banks for potential investments or time deposits with higher yields.
He said the public should always be wary when investing their money.
No Money Is Easy
The police also urged the public anew to be cautious and to not give in easily to the lure of easy money schemes.
“Work harder, there is no easy money,” said Police Colonel Lito Patay, chief of the Criminal Investigation and Detection Group (CIDG)-7.
Patay made the call a day after authorities here raided two companies in Cebu City and Mandaue City – Organico Agri-Business Ventures Corporation and Ada Farm Agriventures – for allegedly engaging in pyramiding schemes.
Sentiments
A 26-year-old investor of Ada Farm who requested anonymity admitted to the Freeman that the lure of easy and fast money was what convinced her to invest.
"Galagot man gud ko walay klaro," she said.
She joined in the last week of March online upon the invitation of a friend. There were reportedly no papers that needed to be filled out and she only had to send her payment via money transfer.
The company reportedly promised a payout after two months. Recently, the company reportedly told her that her investment would be taxed and she would need to put P100 out even if these were not part of the initial agreement.
“I thought it was really good for investment the ADA Farm but really disappointed.”
Even so, she reportedly does not plan to sue Ada Farm because she’s already exhausted.
But not all investors share her sentiments.
Another woman, an investor at Organico, said she did not regret her decision and that she knew there were risks involved.
The woman, a 30-year-old domestic helper in Hong Kong, invested P36,000 in March this year upon her uncle’s prodding. She was promised to get P70,000.
Another investor, a 55-year-old man from Leyte, also did not regret shelling his money out, especially that he was able to get the promised P70,000 return money.
In fact, the P70,000 he received from his P36,000 investment was what prompted him to make another investment with Organico, this time, at P252,000.
Despite not getting the promised P300,000 for the second investment, he said he has no regrets and even defended Organico.
"Wala man ko magmahay kay mao man ang kinabuhi…Kanang Organico, dako ug tabang sa pobre kay wala man na sila magbinuang kay imong gi-invest, mabalik man and walay problema ang Organico kay kung pila imo gi-invest, mabalik man (I did not regret it because life is a risk… Organico has helped the poor. They weren’t defrauding them because the investment really does go back to the investor)," he told The Freeman. — Joebelyn P. Carvajal, Diane Leizle A. Ganar, JMO (FREEMAN)