ASIC has urged consumers to avoid Connaught Investment Group*, an unlicensed financial services business purporting to be based in the Sydney suburb of St Leonards, which offers fake investment opportunities.

ASIC’s investigation has revealed that persons purporting to be representatives of Connaught Investment Group are cold calling people for investment purposes while quoting the Australian Financial Service (AFS) licence and Australian Company Number (ACN) of a legitimately registered AFS licence holder. They claim to offer advice on warrants, futures, commodities trading, foreign exchange trading, portfolio administration as well as online trading and investor seminars.

Connaught Investment Group is not registered as an Australian company.

The prospective investors are asked to transfer funds into a bank account in the name of Diversified Strategies Pty Ltd which is registered as an Australian company and has the same business address as the Connaught Investment Group. Investors are then given a password to the website, www.connaughtfinancialplanning.com, which enables them to check the fictional status of their investment.

Connaught Investment Group does not hold an AFS licence, which is required under the Corporations Act. The St Leonards addresses for both Connaught Investment Group and Diversified Strategies Pty Ltd are an unrelated dance studio. Calls to their various telephone numbers are no longer answered.

ASIC is presently taking steps to have the website removed.

ASIC Commissioner Greg Tanzer said investors need to be cautious when offered unsolicited investment advice.

‘Making a few basic checks on your investment, before you sign away your hard-earned money, is critical. I strongly urge potential investors to scrutinise all investment opportunities closely and seek professional, licensed advice before making investment decision’, Mr Tanzer said.

This alert follows ASIC and State and Territory police services urging consumers to be alert to investment fraud, having seen an increase in cold-calling activity across Australia.

In May 2012 ASIC issued a public warning notice about Dellingworth Pty Ltd, an unlicensed financial services business purporting to be based on the Gold Coast offering investors returns of up to 50% (refer 12-95MR Investors warned about dealing with Dellingworth Pty Ltd). In February 2012, unlicensed financial planning business Golden Sparrow Pty Ltd was wound up following an application by ASIC to the Supreme Court of Queensland (refer 12-16AD ASIC obtains Supreme Court orders against fraudulent Gold Coast financial services business). In December 2011, a joint operation between the Queensland Police Service (QPS), the Australian Crime Commission (ACC) and ASIC saw multiple search warrants executed across a number of premises and a call centre, including on a company known as West Trade, targeting individuals allegedly involved in investment scams (refer 11-297AD Serious and organised investment scam disrupted on Gold Coast).

*Connaught Investment Group is not associated with the registered company Connaught Consultants (Finance) Pty Ltd (ACN 002 102 203), which holds a legitimate AFS licence.

Background

Cold-calling fraudsters usually contact their victims by telephone and convince them to invest in schemes involving the purchase of shares or investment in index funds or currency trading schemes. Once an investment is made, the fraudsters provide access to a website that shows projected returns, however those returns are completely fictitious. These fraudsters operate without AFS licences and use false addresses and phone lines routed often to another address. In the vast majority of cases, investors lose all of their money. Significant features of this type of scam are:

• the promoters sometimes adopt the company names of legitimate companies who are licensed to provide financial services;

• the scam is supported by sophisticated internet technology including a website which purports to provide investors with real-time information in relation to their trading;

• victims are often initially cold-called by a person purporting to survey their interest in investing generally;

• victims are lured with promises of high returns and then subjected to pressure in order to induce them to hand over their money; and

• when a person falls victim a first time, they are often called back and encouraged to invest in a more sophisticated trading strategy which requires even more money.

If you are suddenly and unexpectedly contacted by somebody trying to sell you a financial product, you should:

• hang up the telephone;

• check the ASIC Registers accessible on www.asic.gov.au to see if the person or company selling the financial product is licensed or authorised to do so, if not then do not invest;

• call the company back using the details on the ASIC register to verify its identity;

• if in any doubt contact ASIC on phone 1300 300 630 or visit ASIC’s MoneySmart website (www.moneysmart.gov.au); and

• remember if it is too good to be true it probably is.