Armchair detective investors take inspiration from Sherlock Holmes to foil investment scams

• Latest Financial Conduct Authority (FCA) research shows how investors are ‘turning detective’ against scammers, using research skills and gut instinct.
• FCA data reveals £2m was saved in 2022 by beady-eyed investors who spotted the warning signs and reported to the FCA, with calls to the FCA increasing 193% in the last five years.
• Armchair detective investors say finding mistakes in material (34%) and requests for personal details to secure the opportunity (34%) are the most common tell-tale signs.
• The FCA’s latest ScamSmart campaign aims to spotlight the skills used by those who have stopped scammers in their tracks to protect other investors.

Analysis of data from the FCA’s consumer helpline has shown a 193% increase in calls to the FCA in the last five years, as investors detect investment scam warning signs. In 2022, over £2m was saved by beady-eyed investors, who called the FCA to report the firm or individual before losing money.

Two in five (39%) respondents claim that their investigative or research skills are helping them to spot the clues. A further 32% are relying on pure gut instinct to distinguish between genuine investment opportunities and potential scams.

The research found that ‘detective’ investors cite finding mistakes (34%) and requests for access to their personal details to secure the opportunity (34%) as the most common tell-tale signs of investment scams. Other warning signs that made investors suspicious included being contacted out of the blue (33%) and being pressured to invest before the ‘offer’ ends (26%).

Of the 1,036 investors who have avoided investment scams the FCA surveyed, a third (33%) came across the opportunity via email, while a quarter (25%) received a personal phone call. Once investors realised the opportunity was fraudulent, 42% warned family and friends, while a further 27% posted on social media to warn others.

Mark Steward, Executive Director of Enforcement and Market Oversight said:

'Scammers are becoming more and more sophisticated, coming up with different tactics, such as impersonation texts or calls, and using the cost of living pressure as a way to tempt investors into false opportunities. Once money has been lost in this way, it’s difficult to get back, so if something seems too good to be true, it probably is. It’s great to see so many investors being able to spot the signs of a scam, and helping others to do the same. You don’t need to be a Sherlock Holmes to spot scams.

'Our Scamsmart advice and tips together with the FCA’s Warning List provides all the clues you need to sort the genuine investments from the fraudulent ones.'

The FCA is calling on all investors to be ScamSmart[2] and check its Warning List[3] before making any investment decisions. This will help identify those who are running scams and are unauthorised to operate, or flag to investors where additional research is needed.

If investors were to deal with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

To help remind investors of the warning signs, the FCA has created an Augmented Reality (AR)[4] experience for investors to use. Usable on mobiles, including Instagram[5], the AR sees several every day objects representing the main warning signs:

• Phone – Unexpected contact: scammers can cold-call or text, but contact might also come from online sources, or in person such as at an exhibition or seminar.
• Piggy bank – Unrealistic returns: scammers often promise tempting returns that sound too good to be true.
• Clock – Time pressure: scammers might offer you a bonus or discount if you invest before a set date.
• Book – False authority: Scammers might use convincing literature and websites, or claim to be regulated (or authorised) by the FCA when they’re not.
• Leaflets – Social proof: scammers might share fake reviews and claim other clients have invested.

It’s important to know how to spot the other warning signs:

• Unexpected contact: traditionally scammers cold-call but contact can also come from online sources, e.g., email or social media, post, word of mouth or even in person at a seminar or exhibition.
• Time pressure: they might offer a bonus or discount to invest before a set date or say the opportunity is only available for a short period.
• Exclusivity or Secrecy: they might claim that you have been specially chosen for an investment opportunity so to keep it to yourself.
• Social proof: they may share fake reviews and claim other clients have invested or want to take up the deal.
• Unrealistic returns: fraudsters often promise tempting returns that sound too good to be true, such as much better interest rates than elsewhere. However, scammers may also offer smaller, more realistic returns to seem legitimate.
• False authority: using convincing literature and websites, claiming to be regulated, speaking with authority on investment products.
• Flattery: building a friendship to lull people into a false sense of security.
• Remote access: scammers may pretend to help and ask people to download software or an app so they can access to your device. This could enable them to access your bank account or make payments using your card.

Notes to editors

1. All figures, unless stated otherwise, are from Censuswide, commissioned by the FCA to survey 1,036 UK adults who currently or previously have held investments, and have avoided a suspected scam.
2. In April, the FCA set out a new three-year strategy designed to improve outcomes for consumers and markets. The strategy focuses on three areas; reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change.
3. Find out more information about the FCA.