ASIC warns of ‘bogus bonds’

The Australian Securities and Investments Commission (ASIC) has reported that imposter bond investment offers have been increasing, with “these bogus bond funds raising not thousands, but millions of dollars from Australian investors”, according to ASIC acting chair Karen Chester.

According to the regulator, scammers have been pretending to be associated with well-known domestic and international financial service firms, offering high-yield bond investments to investors.

The scam generally occurs after the investor completes an online enquiry form expressing interest in receiving investment advice, often via a third party or comparison site.

ASIC has warned that individuals investing in these “bogus bonds” will be directed to pay funds into a bank account and could face those funds being permanently lost, especially if the scammers are based outside of Australia.

It highlighted that some of common tactics deployed by scammers include: 

• sending fake but professional-looking prospectuses with unrealistically high returns;
• falsely stating the bonds are issued by prominent financial services firms when this is not true and there is no underlying investment;
• falsely claiming investor funds will be pooled to invest in government bonds or the bonds of companies with AAA credit ratings;
• falsely claiming the purchase price of the bonds is protected under the Commonwealth Government’s Financial Claims Scheme; and
• using contact details gathered online through fake investment comparison websites to call people and pressure them to invest or risk ‘missing out’.

The regulator recommended that Australian investors should check ASIC’s Offer Notice Board to see if a prospectus relates to a recent offer registered with them and ensure they check ASIC’s registers of financial serves licensees to ensure the parties purporting to issue the product is licensed.

Commenting on the issue, ASIC acting chair Ms Chester urged investors to be wary of claims that are “too good to be true”.

“Interest rates globally are currently extremely low, and expected to remain so for some time. If you see or receive offers of high-yield bonds, they are either high-risk or they may simply be bogus and a scam,” Ms Chester said.

“Investors searching for income-generating investments are at risk of being duped into buying these imposter bonds. Any prospectus offering incredible returns in today’s economic environment is likely to be just that: incredible. ASIC warns investors to be sceptical and make proper inquiries before investing,” Ms Chester continued.

“Ensuring investment products are true to label is front and centre for ASIC. While ‘true to label’ covers all aspects of the investment product being offered, the foundation stone is basic truthfulness, and none more so than that the product issuer is actually who they say they are. This conduct is beyond not being true to label, it’s bogus to label,” she said.

“Investors are also at risk of identity theft,” she added. 

“We remind investors to check that they are actually dealing with the company they think they are dealing with. Do not share personal information online unless you can verify who is using the information and how it will be used. We are seeing a rise in suspicious websites that are simply lead generators for scammers,” she concluded.

ASIC’s scammer alert has followed a recent warning issued by the WA government, whereby scammers targeted home buyers, posing as settlement agents and other parties involved in the home buying process.

The regulator itself has recently been victim to a cyber security breach, after a “threat actor” secured unauthorised access to one of its servers, which contained documents associated with recent Australian Credit Licence applications.

ASIC warned that there is “some risk that some limited information may have been viewed by the threat actor”. However, it added that it has not yet seen any evidence that any ACL application forms or any attachments had been opened or downloaded.

As a precaution, and to protect information and systems, ASIC has now disabled access to the affected server.

The regulator has not yet revealed how new ACL applications should be lodged in the interim.

[Related: ASIC to update ACL process following security breach]