LAST week was filled with news stories about Sunshine Empire. The company has convinced 20,000 Singapore investors to part with as much as $12,000 each.
Despite the publicity, no one is still very sure what the company does.
Both the Singapore and Malaysian authorities have put it on their 'investor alert lists'.
Entities on such lists are not authorised by the authorities to conduct regulated activity.
While not well-known, these lists are extremely useful.
Other governments also have lists which give names of companies doing foreign land sales, internet fraud, lookalike web sites, identity theft, fake lotteries, Nigerian advanced fees, pump and dump, affinity scams, telemarketing and more.
It got me thinking, "Wouldn't it be great if there was a web site listing all questionable companies? Then, if you hear about a deal that sounds too good to be true, you could check it out."
It doesn't exist but we have the next best thing: Dozens of Government web sites identifying suspicious companies around the world.
Below is my selection of the best eight. They contain 2,500 companies on alert lists.
Check them out before giving your hard-earned money to a company you never heard of.
Top 8 government websites listing unauthorised companies
1) Monetary Authority of Singapore (95 companies). www.moneysense.gov.sg > Check our lists > Investor alert list
2) Securities Commission of Malaysia (70 companies and unauthorised websites). www.sc.com.my > Enforcement, more > Investor alerts
3) Australia Securities and Investment Commission (500 companies including 20 fake regulators). www.fido.asic.gov.au > Phone scams blacklist
4) New Zealand Securities Commission (200 companies including 8 fake regulators). www.seccom.govt.nz > Info for investors > Telephone share scams > List of companies
5) Hong Kong Securities and Futures Commission (400 companies). www.invested.hk > Investors alert > Full list
6) UK Financial Services Authority (55 companies). www.fsa.gov.uk > Doing business with the FSA > Being regulated > Enforcing the Law > Unauthorised firms/individuals
7) Same as No 6. Then go to Unauthorised internet banks. It lists internet banks to avoid (600 banks). The list includes look-alike names like "Standard Chartered Cash Centre" and "Citi Finance Bank".
8) Same as No 6. Then go to Unauthorised overseas firms (600 companies). It has links to websites of most of the
unauthorised firms.
Non-transparent but legal
1) Bank Products
YOU'VE seen the brochures. An investment offers a super-high return of 8 per cent, payable in six months. It sounds too good to be true.
You buy. To your relief, everything works out fine. After six months you receive a payment and, sure enough, it comes to 8 per cent of your investment. Years later you discover that the 8 per cent was not a return at all. It was simply a payback of your own money, which the fund or bank called a 'yield'.
Does it sound like a scam? It's not. A footnote in the brochure advises you to read the prospectus.
Most are hard to obtain. When you get it, you find it is over 100 pages long and full of legal jargon.
Buried deep inside is a phrase such as: "Distributions whether out of income and/or capital may have the effect of lowering the net asset value of the fund."
What does it mean? The phrase "distributions out of capital" means the bank or fund simply returns part of your own investment and calls it a yield.
It is ironic. The disclosure is supposed to help investors. But investors are unlikely to find or to understand it.
Mostly, it benefits issuers and banks which distribute the funds and structured products. Their disclosure means you have been duly informed, whether you know it or not.
The argument goes: "You were informed and you bought anyway - so you have no cause for complaint."
2) Insurance companies
They have something similar. NTUC Income sells the most widely promoted product: Revosave. It is an endowment policy that offers "a guaranteed Cash Benefit at five per cent of the sum assured".
You guess it. Most of the 5 per cent is simply a giveback of your own money. The actual return works out to be 2 per cent. That crucial detail never gets mentioned in the brochure, benefit illustration or anywhere else.
3) Reits
Real estate investment trusts (Reits) and Business trusts (ships) also advertise super-high yields of 6 to 9 per cent.
Their prospectus makes no mention of the fact that the yield is gross, before any deduction for depreciation of the assets.
The depreciation acts like a give-back of investors' own money. Subtracting it gives the net yield, which can be as much as 50 per cent less than the advertised yield.
