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Regulators warn against Graphene and other enticing 'investments'

Regulators warn against Graphene and other enticing 'investments'

The FCA and SRA have beefed up their warnings about 'High Yield' investments as ingenious fraudsters think up new enticing schemes to attract investors who are keen to beat the low interest ratescurrently being offered by banks and building societies.

The Financial Conduct Authority [FCA] put out a warning on 15.10.14 which was directely specifically at Graphene,which is a type of carbon that may one day be used in display screens, electrical circuits and batteries known asa 'nano material'.The FCA became concerned after they found evidence of a 'graphene investment firm' on the computers of a suspected boiler room. The FCA believe that the problem stems from the fact that the market in graphene is unregulated, so it is difficult to confirm if the sale relates to a genuine product. Although governments and companies are pouring billions of dollards into graphene research and development, it is unlikley that there will commercial production of the material until around 2020.

This warning follows on from secific FCA warnings about the sale of carbon credits ( certificates that represent the right to emit one tonne of carbon dioxide (Co2) which are tradeable. The FCA draw attention in both cases 'dubious high- pressure sales tactics' being used to sell these instruments to investors.

Other enterprising fraudsers are also selling 'Rare Earth metals' which are chemical elements used in the manufacture of products like computers, mobile phones, battteris, satellites and wind turbines. Other scams have also been discovered by the FCA relating to tree and crop plots abroad and other 'ethical and 'alternative' investment opportunities, which seem to have a capacity to disappoint which far outweighs the risks to the investor. These include teak trees, jatropha, paulownia and biofuels with a predicted return of 15- 25 % after 5 years when the crops will be harvested and sold.

The Solicitors Regulation Authority [SRA] are also concerned that fraudsters are targetting law firms to act as cover for the sale of such 'investments'. On 10.9.2013, the SRA issued a warning on high- yield investment fraud, pointing out that if it looks too good to be true, it usually is. They warn in particular against Prime Bank Instrument schemes and Private Placements, which often offer security and opinions from law firms that do not actually make sense, together with the use of undertakings and poorly drafted documentation.

There is a specific warning notice on the SRA about the use of a client account as an escrow service.  See blog article in relation to the prohibition in Rule 14.5 of the SRA Accounts Rules 2011  11th June 2015.

Jeremy is involved in a number of cases brought by a number of regulators including the SRA and FCA relating to the following:

  • Bank to Bank deposits
  • Graphene
  • Insurance Guarantee Schemes
  • Wine
  • Diamonds
  • US Oil Trading
  • Land Banking
  • Overseas Eco property

On most occasions, the aim of the fraudster is to persaude the solicitor to allow his client account to be used as an escrow service. The difficulty that arises is that due diligence is difficult to perform as the fraudsters are often highly plausible, often being ex international lawyers, bankers and accountants of standing.

Although some of the schemes that are caught by the warnings are genuine, it is often difficult for someone without investment experience to spot the issues that will later arise. Solicitors are rarely asked to advise on the mechanicsof the investment, but are duped into believing that the schemes have been set up by other respectable and experienced firms.

For any advice and assistance for issues like these please do call Jeremy on 0844 2722322 or submit a comment below. Jeremy will come back to you at the earliest convenience.

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