Risks of unregulated “investment opportunities”

The Financial Supervision Commission (“FSC”) is warning that not all “investment opportunities” made available to the public are investments subject to FSC regulation. If an investment, or the person offering it, is not regulated by the FSC (or for certain life assurance related products the Insurance and Pensions Authority (“IPA”)) then they are not subject to FSC or IPA regulatory requirements, which include the obligation to ensure that advertisements are not misleading.

Simple examples of “opportunities” recently marketed on the Island as investments but that are not regulated by the FSC or the IPA include the purchase of houses and apartments.

Other “opportunities” that are often described as investments but are not subject to FSC or IPA requirements include where a person is invited to lend money to another person or business, often with a tempting rate of return being suggested. Sometimes these opportunities appear similar to collective investment schemes, but they are not because they are individual lending transactions. Any money lent would be at risk of loss if the borrower cannot repay and would not be covered by the Financial Services Ombudsman Scheme.

John Aspden, Chief Executive of the FSC added: “The public is warned to take great care when faced with such opportunities, to ask questions and to read all small print, because it is often only in the small print that it becomes apparent that a product has disadvantages or may not be what it seems. You should only put your money into a venture that you understand and where you are happy with the level of risk.”

See our registers of firms subject to FSC or IPA regulation, and also some useful consumer information.