Monday December 25, 2006

This is the final article in a series by the Securities Industry Development Centre on smart investing.  

1. Are you an easy prey for investment scams? Take this quiz to check your vulnerability.   You always associate investments with: 

a) 100% profits 

b) Guaranteed returns with no risks 

c) Doubling your money in no time! 

d) None of the above 

         

2. Which of the following statements BEST describes your investment philosophy? 

a) I will choose only an investment that gives high returns with no risk 

b) I will choose an investment that matches my risk tolerance 

c) I will choose an investment that can double my money in no time 

d) I will choose an investment that is highly recommended by close friends 

3. You have been offered a job as a trading executive in a foreign commodity broking firm. The job requires you to get as many clients as possible to trade in a red bean futures contract in Macau. You were told that the investment yields high returns in a short time.   Your clients will have to deposit RM3,000 as a margin deposit at your firm. Your commission will be based on the amount of money your clients deposit in the firm. What is your next course of action? 

a) Start looking for friends and family members to become your clients 

b) Check with the regulators immediately whether the firm is licensed to trade in red bean futures in Macau  

c) Try to invest in the red bean futures contract yourself to test your luck 

d) Find out more about the investment from your friends who are working in the same firm 

         

4. How do you verify whether a unit trust agent is authorised to promote/sell unit trusts? 

a) Request for his call card 

b) Request for his authorisation card issued by the Federation of Malaysian Unit Trust Managers 

c) Not necessary to verify as any person can promote or sell unit trust products 

d) Check for an authorisation letter from the unit trust company 

         

5. Your unit trust agent asks you to give cash to him so that he could buy unit trusts on your behalf. What do you do? 

a) Give him the cash 

b) Give him the cash and request the agent to issue a receipt immediately 

c) Pay him with a cheque in his name 

d) Refuse to give him any cash  

         

6. If you want to check a stockbroker’s licensing status, which of the following websites would be your source for the required information? 

a) www.thestockbroker.com.my 

b) www.sc.com.my 

c) www.licensedcompany.com.my 

d) www.licensedbrokers.com.my 

         

7. A close friend persuades you to invest in an exclusive offshore investment scheme that guarantees 200% return and tax-free. Do you? 

a) Agree to make the investment because you trust your close friend implicitly 

b) Request for written materials on the investment and invest once you have read them 

c) Check with the regulators to see if they have any information on the investment scheme 

d) Agree to invest only if your friend could show the advertisements or news on the investment scheme in the media or the Internet 

         

8. To protect yourself from investment scams, which of the following measure(s) would you adopt? 

a) Read and understand the investment prospectus and annual reports 

b) Seek advice from licensed financial professionals 

c) Be sceptical and ask a lot of questions about the investment 

d) All of the above 

         

9. You will invest in an investment scheme if: 

a) The promotional materials and company website look professional and impressive 

b) The company’s office is at a prestigious address and its name professional and impressive 

b) The company’s office is at a prestigious address and its name sounds official  

sounds official 

c) The company’s personnel wear expensive swanky suits and drive snazzy cars 

d) None of the above 

         

10. If you fall victim to an investment scam, you would:  

a) Do nothing and keep quiet 

b) Blame it on your bad luck 

c) Lodge a report/complaint with the relevant authorities immediately 

d) Pay an unknown person who claims that he can guarantee the full recovery of your money   Answers:  

1. d: If you associate investment with 100% profits, guaranteed returns and doubling your money, you are more susceptible to investment scams. Most investment scams promise high returns with no corresponding risks to entice people to invest in it. 

2. b: Your investment choices should match your risk tolerance. If you are a risk-adverse person, make sure you invest in a low-risk investment scheme. To find out about the risks of each investment products, contact your remisier or licensed investment professionals. 

3. b: Always check with the regulators e.g. Securities Commission or Bank Negara, to verify if a company has been issued a licence and has been allowed to offer or market investment products to the public. 

4. b: The Federation of Malaysian Unit Trust Managers (FMUTM) is responsible for registering all persons who want to market and distribute unit trusts. When dealing with such agents, you should request for his “authorisation card” issued by the FMUTM. For more information on agents, visit FMUTM’s website at www.fmutm.com.my  

5. d: Never ever give cash to your unit trust agent. Always issue a cheque to the trustee or to an authorised person as specified in the prospectus. That is why reading the prospectus before investing is important. 

6. b: For a quick check on whether a company has been licensed or authorised to conduct or offer investment activities, log on to the Securities Commission website at www.sc.com.my or call the SC’s licensing department at (03)6204-8000. 

7. c: Beware of investment companies that offer high yield investments and operate from offshore locations such Bahamas, Macau, British Virgin Island or any other exotic offshore locations. Scammers love to use these international locations to boost their credibility.  

8. d: Before investing, do some research and ensure that you understand what you are buying. Go through the investment scheme annual reports and prospectuses and seek assistance from your remisier or licensed financial professionals to fully understand the information disclosed in these documents. Contact the SC to verify if the company has been licensed or authorised to offer such investment schemes. 

9. d: A company may have an official sounding name with a prestigious office at a premier location, complete with a professional looking website, but that does not mean that it is legitimate. Always check with the SC first. 

10. c: If you come across or become a victim of an investment scam, lodge a complaint with the SC’s complaints department: Tel: (03)6204-8999, fax: (03)6204-8991 or e-mail: aduan@seccom.com.my,  

  • The Securities Industry Development Centre (SIDC) was established in July 1994, and is the training and education arm of the Securities Commission (SC). Its mission is to build human capital, guide investors in the capital market and develop investor education programmes to meet the objectives of the Malaysian Capital Market Masterplan and address national development needs. It is recognised as a premier training centre for capital market participants and regional regulators.  

    • Related posts:

    1. Picking the right unit trust fund
    2. Ask beyond basic questions
    3. Investing in global funds
    4. Introduction to Unit Trust

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