Outsmarting Investment Scams


Outsmarting Investment Scams
Victimized by Ponzi schemes? Lost money on pre-need plans? Learn how to protect yourself from being a scam victim
By Sherwin Chan, RFP

“I got zero!”

Unlike the toothpaste commercial, there is a woeful sighing that comes with that statement. This lament comes from investment scam victims.

Greed is a powerful incentive for individuals who take unmitigated risks with their money. Based from old news reports, victims of Performance Investment Products Corp. (PIPC) plunked in a consolidated amount of $250 million. On the other hand, unsuspecting “investors” devoted $51 million to Royal Manchester Five Trading Corp.

What drives individuals into bilking other people’s money?

Jordan Belfort, author of “The Wolf of Wall Street” and a convicted investment scam artist himself has this to say, “We did some outrageous behavior, some illegal stuff, but everyone was doing it… a lot of people turned a blind eye to what was going on. We were all making money.”

Crooks are not limited anymore to petty thieves that thrive on dark alleys and shabby corners. They now wear corporate suits and sell you stories about solid investments with good returns.

Need for greed
Sometime in 2007, a person went up to this author and inquired about a possible investment with the Rural Bank of Parañaque. The bank’s officer had been wooing him about a “double your money in 5 years” scheme and his efforts were starting to bear fruit. Naturally, he began asking this author whether he should dive into it or not.

In hindsight, an ounce of pretension was worth a pound of manure.

During our discussion, this person showed me printouts of the bank officer’s PowerPoint presentation. It was a sales presentation with little details about where the money would be invested. More than that, the clincher was this statement made by the bank officer – “If you’re still unsure, just invest up to P250,000 only. Anyway, if the investment goes wrong, you are protected by the PDIC.”

A unique sales pitch if you came into the meeting unprepared. But if you’ve heard the trite phrase “Start with the end in mind” then you would understand that this investment was doomed from the start.

Knowledge is power
A little knowledge of basic investment principles like the rule of 72 would help most of us. This principle simply states that you divide the interest rate by 72 to know the length of time it takes to double your money. For our Rural Bank of Parañaque example, that interest rate is somewhere between 13% to 15% p.a.

With this in mind, start thinking of what sort of investments the bank will make to guarantee you an interest rate like that. Remember 2007? Telltale signs of the faltering global economy were already there. If the economy is doing badly, how can one bank have the ability to still generate investments that kind of return?

Nowadays, it really pays to be well informed about what is happening around us. News travels fast but oftentimes our ignorance still persists. A convenient solution to that is to use the Internet to do a background check.

Searching through the Internet for resource, this author came across a post last June 2007 in an online forum called Pinoy Money Talk regarding irregularities with Banco Parañaque. At that time, the Legacy Financial Group wasn’t hogging the headlines yet. However, the fact that a financial institution’s reputation is stained with controversy should make would be investors think twice.

Then again, an organization like the Legacy Group would have been difficult to assess at the beginning. With so many branches and so many depositors, people had the perception that there was nothing wrong. But now that the truth has come out, it appears that they actually offered products like the “double your money in five years” and even “double your money in three years” deposit mentioned above as well as a slew of other “too good to be true” schemes.

Handling scams
In most cases, your easy solution is to compare what the established and well-known banks and financial institutions are offering. Chances are that if they aren’t offering similar products, there is something fishy going on. You should be extra careful with your dealings with investment solicitors.

So what do you do when you are confronted with a possible scam? Our Securities and Exchange Commission (SEC) proposes a set of questions you must ask to protect you and your money.

1. Name of the person and the company making the offer
2. Address of both the person and the company
3. Phone number, particularly the landline
4. SEC registration

Bear in mind though that having an SEC company registration does not grant it the authority to sell investment instruments, such as securities, bonds, commercial papers, or similar financial instruments. Only investment houses and financing companies with QB (quasi-banking) license and with SEC registered securities may offer to sell the same to more than 19 investors. And only SEC registered persons (brokers/dealers/sales people) may offer or sell SEC registered securities to the public.

A case in point is Royal Manchester Five Trading Corp. If you didn’t know already, you can check on the veracity of a corporation’s registration license over at the SEC Web site ( That site carries a preamble that tells you that a name listed there as a registered corporation does not mean they are authorized to sell investment products. Try looking up Royal Manchester Five in its search facility. It is there, but as we all know by now, they were not authorized to sell investment instruments.

If you find irregularities after carefully mulling all of the items, then it’s time to call the SEC–CED (Compliance Monitoring and Enforcement Department) at 724-7650 or 727-2267.

Investing tips
The moribund investing climate we are in today certainly discourages retail investors. The stock market, unit investment trust funds, and mutual funds have lost on average 50% from their highs in 2007. It also doesn’t help that big US banks buckled under the pressure of the subprime meltdown.

Investor confidence needs to be restored before paper asset prices begin to recover. However, lately we’ve seen that most stock market indices have started regaining lost ground due to policies set forth by governments worldwide. If this is the start of a long awaited recovery remains to be seen.

Just always remember that a high rate of return simply means a higher degree of risk. Given that logic, an exorbitant rate of return means that there is also an unbelievable level of risk. Also remember that oft-quoted line, “Don’t invest what you can’t afford to lose.”

If you find it hard to trust banks and investment houses then why not trust in yourself? Your money and talents could be the powerful ingredients for a successful path to entrepreneurship. After all, if you can’t trust other people to do the investing for you, do it yourself.

Sherwin Chan is a Registered Financial Planner. He maintains a weekly personal finance blog at For comments or questions, you may email

One thought on “Outsmarting Investment Scams

  • 100% true.
    1. recruiter approaches you as a friendly, rich and successful and sharing how to make lots of money quick and easy. this person is usually the third sex with collaborators, open or secret to agree with the recruiter. The person may be also well known in entertainment industry.

    2. Pay a joining fee, buy an expensive kit and try to the sell the overpriced product to your friends and relatives who find it hard to say no. Although they know they can find a similar product , be in a vitamin or food supplement, personal care product cheaper at a store.

    3. In the free seminar get together, you are given cheap refreshments, and the host-recruitment trying to show off how he scamed successfully.
    Applauded by his group of co-scammers. He does not pay any taxes.

    4. After buying from this person, you will find many leftover stocks that you will have to use yourself. Naluluto ka sa sariling mantika at mga kaibigin mo nasabit may galit sa iyo!


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