High returns bring high risks

A petrol-station attendant washes a customer’s window in Mexico City. Thai investors believe oil prices are expected to rise further.

He became one of many victims of a scam in which people are promised attractive returns on not only oil-futures trading but also other illegal investments like foreign-exchange trading and gold futures. There are also stock deals offered by illegal brokers.

The authorities, particularly the Securities and Exchange Commission (SEC), have long warned about illegal futures trading, but people continue to fall victim to self-proclaimed "brokers" pitching sweet deals on the futures market.

Satian described how he was parted from his money on the TV programme "Inside SEC" recently, while SEC assistant secretary-general Vasant Thienhom explained how the illegal brokers operate.

Below are excerpts from the discussion.

Moderator: How can we distinguish legal trading from illegal trading?

Vasant: Usually, legal futures brokers will already have a licence from the Finance Ministry or the SEC. To check whether they are legal or not, you can check the SEC website.

Moderator: What's the general practice of these illegal brokers?

Vasant: Mostly, they convince you to invest. There are several ways they find investors. They might call you or you'll see their information on websites. They might also seek new graduates as employees to find customers. Very often they convince their relatives to invest. Mostly, the underlying assets they use to cheat customers are crude oil and gold as they expect the investors will be very interested and the prices are likely to increase. Once customers are lured in, they are asked to put down an initial investment of Bt300,000. In the initial period, most investors get profits and feel it is easy. Some get profits transferred directly to their saving accounts. But later they will be told to put more money to keep their contract status, or that the remaining money is not enough because they have suffered a loss, or that their accounts are already closed.

Moderator: Khun Satian, could you tell us what happened and how you got involved in this investment?

Satian: My wife's niece convinced me to invest in this futures trading. She was working for a company, and she told me that I would get huge returns and showed me statements of other investors with huge profits. She said she would get promoted if she could get a lot of customers. My wife wanted to help her niece, so we invested Bt200,000 in oil and foreign exchange.

Moderator: Did you know anything about oil and foreign exchange?

Satian: I didn't know a thing.

Moderator: Did you get any returns during the investment period?

Satian: No, nothing. My Bt200,000 has gone. My wife called the company and they said our investment had turned negative. If we wanted to do anything about our investment, we would have to invest another Bt200,000. But I suspected that we might have been cheated and filed a police complaint. Then the SEC called and explained to me that they had raided the company and found my contact in the company's customer list. Then I was sure that I had been cheated. If I had not been informed by the SEC, I would have thought the loss was my own mistake.

Moderator: What did the SEC do then?

Vasant: Generally, when we learn about an illegal trading firm we get together with the police and raid the company and examine their operating licence. They not only didn't have a licence but also lied to customers that they invested overseas when they didn't. So this was a fraud. Once we get clear evidence, the SEC files a lawsuit against the company.

Moderator: What warning would you like to give others about this?

Satian: Before you decide to invest, no matter who wants you to, just contact the SEC to find out whether the company is legal. Most importantly, investors should invest in what they really understand. Don't invest in anything if you don't understand it. If there are high returns, there will be high risk, so be careful. If you think the company is credible, check the contract carefully as some companies write contracts to take advantage of customers.