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Site nets investors before they're swindled

FSA looks to foreign govt web fraud 'honey traps'

The US Securities and Exchange Commission has set up a website to act as a net to catch over-eager investors. The site elicited 125,000 hits in just two days.

Investment fraud is a problem all over the world, with many people too keen to take internet offers at face value. The site was set up to catch naive investors before they were duped.

"For some reason people just seem happier buying things on the internet than if someone tells them about something. Perhaps it adds an element of reality," said Kate Burns at the FSA (Financial Services Authority) here in the UK.

A similar website was set up by the Asic (Australian Securities and Investment Commission) on 1 April 1999. The site managed to 'con' 233 people to part with more than A$4m (£1.4m) in the space of a month.

"This just shows how willing people are to part with large sums of money without finding out anything about the company they are giving money to," said Alan Cameron, Asic's chairman.

"The first and best protection against fraud remains people being sceptical about offers which look to good to be true. They usually are," he said.

Although the FSA hasn't taken part in such a scheme, it said it would not rule out the possibility of getting involved in the future.

"We are interested in anything which opens people's eyes to the possibility of fraud," said Burns. "People should err on the side of caution."

The FSA warned potential investors to do a little behind-the-scenes research before making any decisions because, if a firm isn't authorised, an investor "will not be entitled to any compensation", said Burns.

For more information call the FSA on 0845 606 1234 or go to www.fsa.gov.uk.

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