The Securities and Exchange Commission (SEC) has been up to task in the performance of its regulatory function, monitoring activities in the securities industry and protecting investors by providing relevant updates to the public to inform their investment decisions.
The Head of Research at Databank, Alex Boahen, made these comments following the growing number of Ponzi schemes in the country and the recent statement issued by the Economic and Organised Crime Office (EOCO) affirming that CHY Century Heng Yue Group Limited/Sairui E-Commerce Limited’s operations are illegal and it’s one of such schemes.
“Looking at the regulatory side, I think the SEC has been up to task. They have been very aggressive trying to sanitize the investment environment, but it is always difficult to also do it because some of these companies are difficult to track”.
A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors and is based on using new investors’ funds to pay the earlier investors. Such schemes have a consistent flow of returns regardless of market conditions and Investments have not been duly registered with the appropriate regulatory authorities.
In Ghana, a lot of investors fell victims to Ponzi schemes losing huge sums of money especially during the financial sector cleanup.
Examples of perpetrators of such schemes in the country include CB Net Marketing Concept, E Finance and More, Diamond Investment Ltd, Global Coin Community, Fine Fort, TCL Savannah Investment Ltd., and Menzgold Ltd.
Alex Boahen further opined that to curb the heightened rate of these fraudulent operations in the country, there is a need for regulators to strengthen public education on these schemes in order to enable investors to identify such illegal dealers and desist from transacting business with them.
“The bottom line is that you must continue to provide investor education for the vulnerable groups; people who don’t really have education in investment”.
The Databank Head of Research also urged the public to be vigilant when attempting to deal with such companies by looking at how realistic the proposed returns are on the investments.
Highlighting some of the characteristics of Ponzi schemes that the general and investing public should take note of in order to identify such fraudulent activities, Alex Boahen hinted that investors have to look at the rate that these Investing companies are promising.
“You [investors] also have to be very careful because those investments that are promising significantly above market return should always raise an eyebrow.
“As it is now, even government’s long-term bonds in Ghana are attracting a yield of around 19 to 20 percent. So, if you have an investment that is offering you a guarantee return of say 30 percent, then you should be careful.
“It is the pursuit of unrealistic investment returns by some investors that lead them to that,” he remarked.
Although the Government of Ghana together with mandated regulatory authorities have taken steps to reduce this menace, it behooves on investors to conduct due diligence to ascertain the authenticity of such investment companies before investing their monies there.
