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JFSC warns against unregulated investments

Chris Hamblin, Editor, London, 30 June 2016

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The Jersey Financial Services Commission (JFSC) has issued a warning against unregulated investments as part of its statutory duty to reduce the risk of financial loss to the investing public.

In today's prolonged low-interest-rate environment, consumers with money to invest can be tempted by products that appear to offer a high rate of return. The JFSC has recently noticed a number of marketing approaches in different Jersey media that extol the merits of such commodities, or the company offering them, promoting them as alternatives to more traditional financial products, without equally drawing attention to any of the associated risks.

The JFSC's recommendation is to make sure that any firm an HNW deals with clearly explains to him the extent to which his 'investment' is covered by regulation, including any compensation scheme that ought to pay money out in the event of his investment not working out. Its paper says: "Do not hesitate to ask questions of the firm if you need further clarity, including whether the investment is guaranteed by it alone, and if such a guarantee is dependent upon the company’s continuing solvency. Sometimes those products are described as 'investments' but the use of that word is not controlled by the JFSC and so its appearance in marketing material is no guarantee that there is regulatory oversight of their sale by the JFSC.

"This is the case, for example, with many collectables, such as stamps, coins and wine, the sale of which is generally not covered by financial regulation. It is also the case that firms can be regulated for some of their business activities, but not others. This might be because the JFSC examines the firm’s anti-money laundering controls, but has no role in looking at how a firm conducts its selling process, for example. In the event of any concerns or to establish the status of whether an investment is regulated or un-regulated, investors should contact the respective firm with whom they have dealt with in the first instance."

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