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How to spot an investment scam

Every year thousands of people lose millions of pounds due to investment scams. The internet and advances in digital communications mean these kinds of scams are becoming more common and harder to identify. Thankfully there are some warning signs, which you can use to avoid falling victim to scammers. Read on to discover how to spot, avoid and report an investment scam.

What is an investment scam?

Be aware

Some scammers have very convincing websites and other online presence, which makes them look like a legitimate company. Always check with the FCA to make sure they’re registered.

Investment scams aim to get unsuspecting people to hand over money. On the face of it, they can seem perfectly legitimate, appearing knowledgeable with websites, testimonials and marketing material.

The most famous kind of investment scam is a Ponzi Scheme, where money is collected from new investors to pay previous investors. Eventually the money owed is greater than the money being collected and the scheme collapses, leaving all the investors out of pocket.

Today, due to the internet and digital communications, investment scams can be much more complex. Some of these scams are so convincing, even professional investors have fallen victim to them.

Since the pensions freedoms were introduced in April 2015, older people are particularly vulnerable to investment scams because they can access cash lump sums from pension pots.

All investment scams have one thing in common. They claim to be able to offer high levels of return for very little risk.

How to spot an investment scam

Is it a scam?

The FCA’s ScamSmart website has a tool to help you check if an investment or pension opportunity is a scam.

There’s also lots more information about avoiding the latest scams. Visit the ScamSmart website.

Make sure you are aware of the warning signs which might indicate an investment opportunity is a scam.

  • Unsolicited approaches by phone call, text message, email or a person knocking on your door.
  • When a firm doesn’t allow you to call it back.
  • Where you’re forced to make a quick decision, or are pressured into doing so.
  • Contact details you are given, or found on their website, are only mobile phone numbers or a PO box address.
  • You are being offered a high return on your investment, but are told it’s low risk.
Find out more about tackling financial fraud on the Take Five website.

How to protect yourself from investment scams


Just because a firm is authorised does not mean you’re automatically covered by the FSCS or FOS. Even if you’re using an authorised firm, FCA rules only generally apply to mainstream products, rather than ‘niche’ investments, which might be completely unregulated.

To avoid being caught out by a scam, make sure you follow these simple rules.

  1. Reject any unsolicited calls, emails, text messages or visitors to your door. Legitimate investment companies will not cold call, or contact you out of the blue.
  2. Check the FCA register of regulated companies, or the FCA warning list.
  3. If you are thinking about an investment opportunity, seek independent financial advice from an FCA regulated firm.
Find out how to be a ScamSmart investor.

What to do if you think you’ve been targeted

If you think you’ve been targeted by an investment scam, please report it to the FCA Scam Smart website.

If you have lost money to a suspected investment fraud, you should report it to Action Fraud on 0300 123 2040 or online at www.ActionFraud.police.uk.

Beware of being targeted in the future, particularly if you lost money to a scam. Fraudulent companies might take advantage of this and offer to help you get some or all of your money back.

This article is provided by the Money Advice Service.

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