‘Beware of rising fraud in capital markets’

Kampala, Uganda | THE INDEPENDENT | The Capital Markets Authority is intensifying the fight against crime in the capital markets industry, with the Collective Investments Scheme products as the main target. This will also be top on the agenda of the events to mark the World Investor Week 2023 that runs through October 8.

CMA says as Ugandans seek to invest their money, they should undertake research before investing in any product or service, and also invest with licensed and regulated firms. Dickson Ssembuya, CMA Director of Research and Market Development, also warned prospective investors to be wary of unsolicited investment offers, diversify their investment portfolios to reduce risk as well as monitor their investments regularly.

However, Ssembuya says Collective Investment Schemes remain the best investment decision to make due to the various benefits it has compared to other investments.  These include low risk as one’s savings are pooled with many others, hence spreading the risk over all the investors, the ability to invest in big ventures like multiple bonds even with a little saving as well as benefiting from favourable tax policies as the returns have been exempted.

The World Investor Week is a week-long, global campaign promoted by the International Organization of Securities Commissions (IOSCO) to raise awareness about the importance of investor education and protection while also highlighting the various initiatives of securities regulators in critical areas pertaining to the capital markets.

This year, the world will celebrate the seventh annual World Investor Week (WIW), on October 2, CMA says it has noted an increase in the number of incidents relating to fraudulent operators and unlicensed financial schemes across the country and in various forms. These include individuals or firms holding out as investment advisers and fund managers, as well as pyramid schemes operating physically and through online platforms, which seek to take cash deposits from unsuspecting members of the public with a promise of exceptional investment returns.

The Authority says action has already been taken on a number of complaints, warning the public against seeking investment advice or dealing with any unlicensed persons. Recently, the CMA warned of a new suspect investment business model where three companies dealing in the rearing of chicken had taken root around Kampala; Capital Chicken Ltd, The Mall Fund Ltd, and Veta Plan Chicken.

The CMA accused them of conducting business akin to capital markets yet they were not licensed. The companies responded by saying they are registered with the URSB as farming ventures, not financial companies dealing in stocks. However, suspicion arose from their mode of operations where an investor deposits their money with the firm and waits for five months before getting paid between 40 and 60 percent depending on how much they have invested.

It is said, that the pay to the investors is raised from the new investors that come aboard, not from the chicken revenues. The more investors coming the more the availability of cash to pay the old investors, which the regulators say is a Ponzi operation.  Ssembuya says they have organized public lectures online where they will sensitize Ugandans on how to protect themselves against scams.

***

URN