Investors Alert – “Cold Calling”
by Financial Services Agency “FSA” , Government of Japan
Today, so-called “Cold Calling,” a fraudulent practice aimed at soliciting investors, is conducted all over the world. “Cold-calling” is a practice where by an entity disguises itself as a brokerage firm or an asset management firm and approaches potential investors via non face-to-face channels, such as by phone, fax, and emails, in order to solicit investment in securities or financial products. Typically, a “cold caller” makes unsolicited calls to potential investors, cajoles them into deciding to purchase certain securities, and then, becomes unavailable for contact after the investor sends the money for that purchase. As a result, the investors cannot obtain the securities although they made the payment, and they also cannot get back the money they paid. Investors need to be more careful and vigilant, as cold callers have been using more varied and more sophisticated tactics. (For example, some cold callers execute transactions properly and make profits for investors at first. Then, they solicit bigger transaction and make the investors transfer the money for it. After that, the cold callers disappear.)
In most countries, a person is required to be registered with or licensed by the national regulatory body before conducting solicitation of securities transactions. However, cold-callers do not have such registration or licenses. One of the characteristics of cold callers is that it is extremely difficult to discover their whereabouts. Many cold callers indicate their office locations on their websites (or documents sent to investors), but they rarely operate at that location. Apparently, cold callers intentionally hide their whereabouts, so that they can avoid being visited by the investors they approach. Notably, it is very typical that cold callers claim that they are located in a country that is different from the location of the prospective victim. For example, there are many cases in which cold callers that have approached American or European investors claims that to have an office located in Japan (at a building in Tokyo, for instance.)
The FSA has received extensive information from overseas investors and foreign regulators with regard to cold callers who claim to be located in Japan. The FSA has made a list of entities which are not registered with or authorized by the FSA under the Financial Instrument and Exchange Act of Japan. Investors should be very careful and vigilant about conducting business with these entities, potentially opting against conducting any transactions via these entities.
Recognizing the need for cooperation among securities regulators in order to combat cold calling, the International Organization of Securities Commissions (IOSCO) – the international body consisted of securities regulators around the world – publicized a statement for investors alert on cold calling. In the context of such international cooperation, the FSA brings attention and warning to investors by putting the list of suspected cold-callers. Likewise, foreign regulators publicize the same kind of list and issue warnings to investors on their own websites. When you are solicited by an entity to invest in certain securities, it is very important for you to check all regulators’ websites in advance of making decisions.
It has been noted that the entities do not cover all exiting cold callers in the world. Other cold callers may exist. Therefore, it is recommended that investors check not only the list, but also the List of licensed (registered) Financial Institutions and confirm whether the entity is registered with the FSA. If not registered, sufficient caution is necessary, such as not having a business with such entities.
Based on information received from investors. investors should be aware that the solicitations of investment by these listed entities have a possibility of cold calling. Please be reminded that other suspected cold callers may exist.