THE Security and Exchange Commission (SEC) reiterates its warning to the public regarding the dangers of investing in companies or entities engaged in fraudulent activities.
This, after a joint raid was conducted by the National Bureau of Investigation (NBI) National Capital Region (NCR), along with the SEC NCR and Cebu, on Feb. 22, 2024, targeting Fergus Inc., a business establishment in Cebu City allegedly engaged in fraudulent activities. Four Australian nationals reportedly lost 1.2 million Australian dollars, equivalent to around P43 million, to the company.
In an interview with SunStar Cebu, SEC Cebu information officer Dione Diano stressed that the public should watch for signs that may indicate whether a business is legitimate or potentially involved in fraudulent activities.
Before putting in their hard-earned money, Dione said the public should investigate whether the company possesses the necessary permits and licenses to operate. Additionally, if a company offers services that involve collecting investments, it should be able to present a secondary license.
The first rule is to know if they have the appropriate licenses, she said.
In the case of Fergus Inc., although they were registered with the SEC as a business process outsourcing company, it did not possess the secondary license required to collect investments.
Another aspect to consider, according to Diano, is the business purpose and operations, particularly how the business generates profit.
She said some businesses may engage in Ponzi schemes, which involve paying existing investors with funds collected from new investors. Ponzi schemes often promise investors high returns with little or no risk from their initial investment.
“They have to check where the profit comes from. Is it merely coming from other members joining or other investors’ money?” said Diano.
Besides conducting a background check, the public should also investigate the specific individuals operating the establishment for any suspicious behavior. One indicator is when individuals within the company refuse to reveal their identity and contact details. Some companies only engage in one-way calls and do not provide contact information.
“There are cases where it’s like that nakasugod na sila og invest and then kung kanusa sila ka suspicious diha ra sila makarealize they have no way of contacting the company,” said Diano.
(There are cases where they have already started investing, and only when they become suspicious do they realize they have no way of contacting the company.)
Another red flag, the public should watch out for is the promise of high returns or offers that sound too good to be true, with guarantees of investors not losing money.
“The public should remember even legitimate investments have the risk of losing profit,” said Diano.
Diano said the SEC cannot pinpoint specific industries or sectors that frequently engage in fraudulent activities because scammers are becoming more creative.
She also emphasized that job seekers should conduct research on companies they’re applying to, to avoid becoming accomplices in fraudulent schemes. It also urged the public to promptly report any scams.
“Scammers can use all types of businesses and industries, the public just have to be wary and check the legitimacy,” said Diona. / RJM