Be wary of get-rich-quick offers, PSE warns public

The Securities and Exchange Commission has warned the investing public to be more cautious in dealing with companies that offer high returns for low investments.

SEC said the public should learn to invest wisely and take personal responsibility for their investment decisions since the commission does not have the capacity to oversee and regulate the entire investing public.

With the need to earn extra money becoming increasingly urgent, various investment proposals are dangled before the public, promising big and quick bucks with little or no effort on the investors’ part.

SEC said the public should not be swayed by these fast-talking promoters or they may end up with nothing but an empty savings account. "Don’t give in to high pressure tactics. Take your time before making any decision. Don’t be overimpressed by professional sounding people and never rely on claims made by a company without checking them out yourself," the SEC said.

To help unsuspecting investors reduce their chances of being cheated, the SEC has issued an advisory, warning the public against certain get-rich-quick schemes being employed by unscrupulous individuals to advance their personal interests.

SEC said the public should be wary of schemes that are based primarily on paying commissions for recruiting new participants into the program, that promise sky-high returns in a short period of time, and that offer home investment or employment opportunities.

In the classic pyramid scheme, participants make money mostly through recruiting new members into the group. Usually, these involve selling some product or service. The underlying goods and services, which vary from vitamins to car leases, serve only to make the schemes legitimate.

SEC said all pyramid schemes collapse when they run out of people to get money from.

The commission, however, pointed out that not all multi-level marketing schemes are illegal as long as the earnings are related to an individual’s performance as a salesperson of the products or services being marketed.

Nevertheless, investors are still encouraged to check with the Department of Trade and Industry before getting involved in any multi-level marketing scheme.

On the other hand, investors who are offered high interest rates in exchange for a small amount of investment should also think twice before parting with their hard-earned money. "If someone asks you to invest money and promises to pay you interest at incredible rates, smell something fishy. What he’s probably doing is paying you with their money," the SEC said.

SEC said that when the time comes to return the money, the company will give it back with the promised interest and then offer the same deal again but it’s only a matter of time before that corporation runs out of people to get money from, leaving investors with an empty bag.

The commission has also warned the public against persons or companies that represent themselves as being authorized by the SEC to accept investments or manage other people’s money. These people, according to the SEC, present their company’s certificate of incorporation just to show that they are legitimate securities market professionals or what they do is legal.

But the registration of a company with the SEC does not necessarily mean that it is authorized to provide financial services. Such activities generally require another secondary license from the SEC or Bangko Sentral ng Pilipinas.

SEC said investors who encounter any of these investment proposals must promptly report to the commission to help stop the continued activities of these scam artists.

Strengthening its guard against securities fraud, the SEC has issued a number of cease-and-desist orders against errant firms, including Prosperity.com, G. Cosmos Philippines, and Multitel.

Prosperity and G. Cosmos offer investment schemes that involve the recruitment of new members into the program to earn commissions. SEC said the products offered by Prosperity and G. Cosmos should have been registered with the corporate watchdog as the investment contracts signed by their clients are considered securities.

Multitel, on the other hand, promises exorbitant returns on investment and uses high pressure sales techniques to lure investors.

The increasing number of companies supposedly into pyramiding and the growing number of complaints and queries received has prompted the DTI to draft a Department Administrative Order that would strengthen regulations to clamp down on these unscrupulous activities.

The draft order provides that any party found to have engaged in pyramiding will be meted a penalty depending on the gravity of offense. Among the sanctions being eyed are the issuance of a CDO, cancellation of contract without damages, confiscation of consumer products found harmful to public health and safety, and payment of fines ranging from P500 to P3,000 with an additional fine of P1,000 per day of continuing violation.

According to the Consumer Act, pyramiding or chain distribution plans are sales devices hinged on the principle of a person making an investment and earning profit from such by recruiting other people to join the plan. The succeeding people recruited are required to make the same amount of investment.