Serge O’s tip Beware of hidden risks in offers to grow your investment by more than 12

Posted on November 16, 2012

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MANILA—The promise of an unrealistically high profit, the payment of post-paid checks and the utter lack of regulation by any government body are classic signs that an investment body is operating a pyramid scam.

Sen. Sergio Osmeña III, chair of the Senate committee on banks and financial institutions, said any investment that promises a yield higher than 12 percent should make a potential investor nervous.

“That should already alert you that what is being offered is a scam,” he told the Inquirer in an exclusive interview.

The senator said it is actually difficult to peg a percentage range for profit to declare an investment legitimate.

He recalled that during the 1999-2000 period, a 10-percent return would be considered realistic.

“But that is no longer normal now. That would be considered high,” Osmeña noted.

A basic rule that a potential investor should keep in mind is this: the higher the promised return, the risker the business.

“Promising a 70-percent return even over five years is a scam. Imagine 70 percent in a month,” Osmeña exclaimed.

An investment must indicate where its source of profit comes from. If this is unclear, a potential investor must clarify this with the party offering the profit.

Osmeña said the Senate already investigated similar schemes that also gypped quite a number of clueless victims in 2004.

That pyramid scams have happened before and have already victimized so many should have served their purpose of warning the rest.

However, Osmeña said that such schemes are repeated over time could no longer be blamed on the victims’ ignorance.

“This is about greed. There are rich and educated people who also fall victims to these scams,” he said. The senator said proving that an investment is a scam would be difficult initially.

But an early warning system that would involve government bodies like the Department of Trade and Industry, Bangko Sentral ng Pilipinas and Securities and Exchange Commission should now be formed to subject all investment bodies to regulation, he added.

Osmeña said the enticement of more victims in the newest scam might have been prevented had proper consumer protection measures been put in place.

“The most immediate thing to do right now is to create a credible group that would scrutinize suspicious investments. They can announce that they are issuing a public warning against a specific business, saying it could be a scam,” the senator said. /INQUIRER

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