Dubious and fraudulent investment schemes can negatively impact people’s lifestyle, financial security and mental health. The promoters of dubious investment schemes often try to legitimise them by involving solicitors and law firms. They often tell people that their money is safe because the solicitor’s professional indemnity insurance (PII) and the Compensation Fund will protect their money. Suggesting these protections are available is misleading as compensation is not guaranteed.
Very few solicitors knowingly become involved in the promotion or administration of a questionable investment scheme. However, some might get involved by acting for the promoter of a scheme or for the people interested in investing their money in these schemes. Sometimes solicitors’ involvement is to pass people’s money through their client account.
We are concerned about schemes that use a solicitor’s reputation to encourage people to invest. The damage and financial losses for people can be high. If solicitors are involved in such schemes, they risk harming public trust in the profession. We are likely to take action in these cases, including making a referral to the Solicitors Disciplinary Tribunal (SDT).
Dubious investment schemes might offer unrealistically high returns for people and lead to significant losses of money. We have seen schemes for potential investment in:
hotel room leasing
car park spaces
bank instrument trading
In September 2018 we were investigating 35 reports of investment fraud, which is a reduction from the 51 reports we were investigating in March. However, this does not mean that the issue is becoming less serious. Many of the claims involve groups of people.
There have been 114 claims to the Compensation Fund totalling £48.2m since 2015 relating to investment schemes. This figure does not include claims to the Compensation Fund about mortgage fraud.
The Financial Conduct Agency’s Scam Smart page contains advice on recognising the warning signs of investment fraud.
Our investment fraud paper gives more information about the signs of investment fraud and the consequences for those who become involved.
What are we doing
Where solicitors have allowed their client account to be used as a banking facility, or have become directly involved in questionable schemes, we will act to protect the public. Solicitors who act dishonestly, or without integrity, can expect us to take disciplinary action and refer them to the SDT.
We are carrying out research to understand why people get involved in dubious schemes. We can then give the public information so that they are less likely to be drawn into these scams.