Smart Investors Rewarded by SFC

The SFC is pleased to give out six more Smart Investor Awards to the public and to introduce a new investment scam Alert List for easier searches.

The Awards are given to people who reported “boiler rooms” and other financial scams to the SFC (Note 1). Three of the winners in this round of Awards were cold-called by suspect boiler room operators, who purported to operate from Bahamas, British West Indies and Shanghai respectively offering investments in overseas stocks. Fortunately, the investors were alert and did not suffer any losses.

The other three award winners reported “phishes” (emails) which enticed them to disclose their personal data. Each of them received an email allegedly from an overseas bank requesting customers to click on the embedded links to enter their personal data for confirmation.

As a result of their reports, the names of seven dubious entities have been put on the Alert List on the SFC investor education portal, the Electronic Investor Resources Centre (eIRC) located at www.eirc.hk. At present, there are 298 entities on the Alert List.

Presenting the Awards yesterday at a ceremony at the SFC, Mr Ian Johnston, Adviser to Chairman’s Office of the SFC, said: “Very often, it is difficult for regulators to obtain concrete evidence of the identity or activities of cold callers as they often operate in ‘virtual offices’ with no actual operation in Hong Kong. As such, it is important for investors to protect themselves in the first place. Educated investors are the best defence against scams.” (Note 2)

Since January 2005, the SFC has received 120 complaints of boiler rooms and online financial scams involving losses reported by investors of $25.4 million. Two of the victims were Hong Kong investors who had lost a total of about $586,000. During the same period, 77 entities have been put on the Alert List.

To facilitate public search of information, the SFC has revamped the Alert List and made it more user-friendly. Since its introduction in November 2000, the number and types of entities being put on the Alert List have been growing rapidly. We have therefore divided the entities into four types, namely boiler rooms, scam websites, phishes and unlicensed overseas entities (Note 3). Investors can now easily search an entity by name or the type of scam.

Apart from the Alert List, various educational materials about financial scams (e.g. common tactics of fraudsters and investor tips) are available at the “Investor Alert” section on the eIRC.

The SFC continues to encourage the public to report suspicious activities for consideration of the Smart Investor Awards.

Ends

Notes to Editor:

1. The Smart Investor Awards were introduced in February 2004 to encourage the public to report financial scams. Including the latest round of six awardees, 19 awards have been given out. Each winner receives an SFC corporate watch and a certificate of recognition.

2. Details of the Awards and photographs of yesterday’s presentation ceremony are available on the eIRC under the section of “Investor Alert” - “Smart Investor Awards”.

3. Brief explanation of the four types of scams on the Alert List:

Boiler rooms – Boiler room operators typically make use of slick, professional-sounding salespeople to “cold call” and use high pressure sales tactics to lure investors into lucrative-sounding investment opportunities. They often adopt names similar to legitimate financial institutions to confuse investors. Once investors have parted with their money, boiler room companies are usually no longer contactable.

Scam websites – Dubious or false websites may offer too-good-to-be-true investment opportunities that do not actually exist. Alternatively, such websites may be fraudulent copycat websites imitating the websites of reputable financial institutions to lure investors to part with their money and/or disclose personal information.

Phishes – Phishes are emails which usually imitate legitimate financial institutions to entice recipients to disclose their credit card / bank account numbers and passwords / Personal Identification Numbers (PINs).

Unlicensed overseas entities – Sometimes overseas entities appear to target Hong Kong investors whilst not having been licensed to carry out regulated activities in Hong Kong. Alternatively, such overseas entities may provide financial investment trading platforms on the Internet.