Unlicensed Trading Platforms: Creating Awareness on the Risks

COVID-19 presents a whole new environment on how we best operate to ensure that our state of finances is stable and to continue to make money in investing opportunities where possible. Globally and locally, the equity market is badly hit by decreasing retail participation, loss of employment, and business closure.

In a crisis like this, we are likely to find many avenues for generating a quick income. Some get caught in trading platforms that offers great returns and proclaim themselves as credible, licensed platforms. These so-called genuine ‘investment advisors’ are encouraging investors to trade for fast money. Due to the uncertainty of their financial situation, some get caught without realising that these are not regulated platform.

Unlicensed trading platforms are operated by entities which are neither licensed nor regulated. Most of these unlicensed platforms prefer to target consumers via online advertisements, unsolicited phone calls, emails or messaging applications. In some cases, events or webinars and seminars are conducted to promote the platform which offers commissions to entice new customers to trade on the platforms.

Advertisements that pop-up while browsing, tends to offer appealing returns, promoting get-rich-quick schemes or guaranteed money back opportunities. Of late these online trading scams, real estate trusts, and insurance endowments are being marketed irresponsibly and misleadingly. Falsely claiming themselves as a licensed platform for trading, they entice gullible investors. Every year we hear of investors being cheated, scammed and trapped.

Capital Markets and Services Act 2007 (CMSA) by Securities Commission (SC) states that conducting any activities involves trading/investment must be with a valid license. Investors should remain cautious when approached by operators who offer returns that are exceptionally high and too good to be true.

Information is freely available on InvestSmart website by Securities Commission (SC) for investors to learn and upgrade their knowledge about investing. Securities Commission (SC) also provides an alert list of unauthorized/ unlicensed companies/ individuals/platforms which are unlicensed and unauthorized. The list is re-checked and validated as frequently as possible. This is primarily because the list of companies gets audited and updated when some of them lose their investment legitimacy.

Making informed decisions is important as a responsible investor. You should trust and rely on information that is credible and provided by licensed financial institutions. It is also useful to attend investment classes or courses, webinars and seminars by credible organisations so that we keep ourselves updated about the current investment market. For what it is worth, as a new investor, you must do your homework. Check out the validity of the trading platform, and if you are ever in doubt, check with the relevant authorities. Know that as an investor you will not be protected if you deal with unlicensed persons/entities, especially entities operating offshore. Trust only those platforms that are licensed.