The Capital Markets Authority (CMA) has warned Kenyans against falling victim to fraudulent investment schemes, highlighting five common tactics used by fake investment firms to deceive unsuspecting investors.
In a public advisory issued on Tuesday, October 6, the regulator identified promises of unusually high returns with little or no risk as one of the biggest warning signs of an investment scam.
CMA urged Kenyans to exercise caution whenever an investment opportunity guarantees massive profits while downplaying or eliminating the possibility of losses.
“If they guarantee you 30 per cent every month with no risk, that is not an investment tip. That is a red flag. The promise of high returns with little or no risk is one of the clearest signs of an investment scam," CMA warned.
The regulator also identified pressure to invest immediately as another major red flag. Fraudsters often create a sense of urgency by sending messages designed to make potential investors believe they will lose an opportunity unless they act immediately.
Such messages may include phrases such as, “Offer ends today! Send money now”, according to CMA.
Investors were further advised to confirm whether a company offering investment services is licensed before sending any money.
CMA said legitimate investment firms should appear on its official register of licensed market participants. Investors can use the regulator’s dedicated portal to establish whether a broker, fund manager, investment adviser or online forex dealer has the necessary approval to operate.
The portal contains licensed players operating in different segments of Kenya’s capital markets, including fund managers, stockbrokers, investment banks, investment advisers, collective investment schemes and derivatives brokers.
It also provides details of authorised securities dealers, online foreign exchange brokers, REIT managers, corporate trustees, venture capital firms and intermediary service platform providers.
Another warning sign highlighted by CMA is the use of unusual or suspicious payment methods.
Investors should be particularly cautious when asked to transfer money through cryptocurrency or other payment channels that make it difficult to trace where the funds are going.
The regulator also warned against investment opportunities promoted through celebrity videos, online acquaintances or individuals claiming to possess secret strategies for generating quick profits.
CMA's latest advisory comes weeks after the regulator raised concerns over 15 investment platforms it accused of operating unlawfully and soliciting money from Kenyans through fraudulent means.
In a notice dated September 12, CMA said the platforms were offering, or claiming to offer, investment services without obtaining the licences and approvals required under Kenyan law.
The Authority published the names of the 15 platforms and directed members of the public to its official website, cma.or.ke, for the complete list.
Some of the flagged platforms had allegedly marketed cryptocurrency-related investment opportunities, while others promoted forex trading, cryptocurrency investments and Money Market Funds (MMFs).
CMA has consequently urged Kenyans to stop and verify before committing their money to any investment opportunity.
The regulator said investors should be especially cautious when dealing with schemes promising unusually high returns, demanding immediate payments or operating without the necessary regulatory approvals.
