ASIC warns of cold callers advising investors into high-risk investments

Rick Steves

ASIC identified cold-calling operators luring consumers into receiving inappropriate superannuation switching advice.

The Australian Securities and Investments Commission has issued a warning over dodgy cold-calling operators and online baiting tactics.

Following an ASIC review which identified some cold-calling operators using high-pressure sales tactics and online click-bait advertisements to lure consumers into receiving inappropriate superannuation switching advice, the regulator is now warning investors of the new trends.

ASIC began taking action against this type of business model in 2020 with the revocation of the Australian Financial Services (AFS) licence of Smart Solutions Pty Ltd and the banning of the adviser and responsible manager.

Since 2020, ASIC has finalised other matters in relation to this type of conduct, including numerous adviser bannings, financial advice licensee cancellations, supervision orders and criminal convictions for hawking — the use of unsolicited marketing and sales of financial products.

“Deterring cold calling for superannuation switching models is an ASIC priority”

The persons whom ASIC calls “dodgy cold calling operators” are the ones that make unsolicited calls to consumers after obtaining their personal information from third-party data brokers or by using online clickbait.

These operators, which target investors between 25 to 50 years of age, have lead generation and referral arrangements with a small subset of financial advisers, who typically recommend consumers switch to super products incurring significant fees.

The financial watchdog has observed considerable volumes of superannuation savings flowing into high-risk property-managed investment schemes — either via platform superannuation products offered by APRA-regulated funds or a self-managed superannuation fund (SMSF) — and associated payments made to cold-calling businesses.

ASIC Commissioner Alan Kirkland said: “Some of these cold calling operators are pressuring consumers in critical retirement-saving years to move their savings when it is not in their best interests, putting them at risk of having less super as a result of inappropriate investments, fees and charges. The small subset of financial advisers benefitting from this conduct threatens to undermine the reputation of the rest of the industry.”

“Deterring cold calling for superannuation switching models is an ASIC priority, and we will continue to take action, including enforcement action, to protect consumers from high pressure, cold calling practices that induce inappropriate superannuation-switching. Financial advice licensees and super trustees have a critical role to play in preventing this conduct, including by reporting it to ASIC if and when they become aware of the conduct.”

ASIC wants financial advice licensees to ensure they have in place adequate monitoring and supervision arrangements to detect concerning conduct and to make sure their advisers are acting in the best interests of their clients.

Japan FSA also warned against cold callers

Earlier this month, Japan’s Financial Services Agency (FSA) issued an urgent warning to investors regarding an increase in fraudulent schemes involving cold calling.

The deceptive practice involves entities pretending to be reputable brokerage or asset management firms contacting potential investors through phone, email, or fax to solicit investments in securities or financial products.

After securing payments for supposed investments, these cold callers often vanish, leaving investors without their money or any securities. The FSA has clarified that legitimate solicitation of securities transactions requires registration or licensing by national regulatory bodies, which these cold callers lack. These entities often provide false addresses and claim to operate from countries different from their target victims, complicating efforts to track them down.

The warning follows reports from overseas investors and cooperation with international regulators who have identified several entities claiming to be based in Japan. These entities are not registered under the Financial Instrument and Exchange Act of Japan, prompting the FSA to list these non-authorized entities publicly. Investors are strongly advised to verify any firm by consulting this list as well as checking for official registration before making any investment decisions.

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