Rise of the investment company clones

25 September 2020

4 minute read

Beware the copycat investment firms out to steal your cash.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

What you’ll learn:

  • How to defend yourself from the scourge of clone companies as warnings about these scammers grow fourfold over five years.
  • Why you need to always be on your guard when receiving unsolicited calls or emails from investment firms.
  • Who to report a scam to if you are suspicious, and suspect an offer is too good to be true.

You might think imitation is the sincerest form of flattery but when you’re doing business with an investment firm it’s the last thing you want to see.

Scammers that imitate genuine financial companies to gain the trust of customers only to dupe them out of their savings are rising sharply – with the Financial Conduct Authority (FCA) reporting a fourfold rise in alerts about these ‘clone’ firms between 2014 and 2019.

The watchdog issued warnings over 365 such firms in 2019 compared to just 92 five years earlier. 

Clones operate by stealing the details of genuine firms regulated by the FCA and pretend they are their own. They might tweak names slightly although the boldest don’t even bother and simply hijack the name and usually add different telephone contact details.

So when you go on to check their credentials it can appear as if you’re dealing with a genuine company.

Be warned if you proceed with an investment through one of these clones, you’re likely to lose any money your part with, as there is no protection from the Financial Services Compensation Scheme. Only investments with genuine firms are covered (up to £85,000 per claim).

The FCA is so concerned about the rise of the clones that is has set up a specialist team to try and work out how to disrupt and stamp out the scammers and offer advice to companies that are cloned on how to protect themselves and customers.

Your best defence is not to fall foul of a clone firm in the first place. So follow our checklist to help you protect yourself against clones:

Step 1: Ignore unsolicited calls and emails

Do not be taken in by phone calls or emails that arrive out of the blue offering tempting investment opportunities. Unsolicited calls from pension companies you have no previous relationship with were banned in early 2019. That won’t stop the sneakiest scammers from using the phone and others will simply switch their tactics to using email instead. 

Step 2: Apply caution when responding to social media ads

Beware of advertisements that pop up on social media promising juicy investment returns and steer you towards websites that are probably fake.

Step 3: Don’t click on to the link they send you

Even if you think an approach might be genuine do plenty of research before going ahead. Don’t click on to any links or attachments contained in an email – instead search online for the genuine company’s website address and contact them direct via the general switchboard number. Don’t forget clones often imitate real company websites – mimicking colour schemes and wording and using logos from regulators to add an air of legitimacy – but any phone numbers are likely to lead you only to the scammer.

Step 4: Check official listings

Always check the FCA register for the company’s phone number, email and address and use these to make contact rather than those that appear on the website you’re directed to. Some scammers might claim the official FCA details are out of date – but that is probably a ruse to put you off the scent and continue with the ‘deal’. 

You can also try conventional ID checks, such as directory enquiries or Companies House. The FCA also publishes a warning list of known scams but remember, even if the deal you’re checking isn’t on that list, that doesn’t mean you should go ahead.

Step 5: Pause for thought

Don’t be rushed. However plausible a sales person comes across, don’t be rushed into agreeing a deal. If the returns promised seem too good to be true, they almost certainly are and at the very least the arrangement will be high risk. More likely, you could become a victim of an outright scam, and any money you hand over will be lost and unrecoverable. 

Pension fraudsters alone scammed nearly £31 million from victims over the three years from April 2017 to April 2020, according to the FCA ScamSmart campaign, with the amounts stolen ranging from £1,000 to £500,000, and the average victim being a man in his 50s. This figure is likely to be the tip of the iceberg as many frauds and scams go unreported.

If you’ve any doubts about an investment offer then don’t proceed. Legitimate companies won’t pressurise you to move money quickly. Never give out bank or credit card details unless you’re confident you know who you’re dealing with.

Step 6: Report a scam

If you are suspicious, consider reporting the suspected scammer to the FCA Consumer Helpline on 0800 111 6768. Find out more about scams and how to spot them at the ScamSmart website.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances. Smart Investor doesn’t offer personal financial advice. If you’re not sure about investing, seek independent advice.

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