If you were making your way through Waterloo at rush hour recently you may have spotted a mysterious ATM offering untold riches before the Financial Conduct Authority’s (FCA) Emil the Seal mascot emerged to warn of the dangers of investment scams.
The stunt was part of a broader campaign to raise awareness of the regulator’s ‘Firm Checker’ tool. This is a key weapon in your arsenal when it comes to beating the fraudsters. In this article we explain what the tool is, how it works and – to help work out when it might come in handy – provide a list of warning signs that you could be being enticed into a scam.
What is the Firm Checker and how does it work?
The Firm Checker is exactly as described; it allows you to search a database to see if a firm offering an investment service or product is FCA-approved. Almost all financial firms in the UK must be registered or authorised by the FCA.
Sometimes scammers will use the name of a regulated firm but other details will be different. That’s why it’s important that you check the details you have for the firm match those on the database, including items like the website or postcode of the head office.
The search results not only tell you whether the firm is FCA authorised, it also goes into more detail on what it has permission to do. For example, it might be allowed to give advice on investments or pass on orders to a third party to carry out but not to make or manage investments on your behalf.
The tool cannot confirm if the Financial Services Compensation Scheme or Financial Ombudsman Service (a free service which settles complaints between consumers and financial services providers) would definitely apply if something went wrong. It also doesn’t include details of restrictions on a firm’s activities These can be found on the Financial Services Register, which is a free, public record managed by the FCA that lists firms, individuals, and bodies authorised or regulated by the FCA and/or the Prudential Regulation Authority.
It’s also worth noting that some areas, like buy-to-let mortgages, timeshares and advice on estate planning, are not covered by the FCA. If you’re unsure about anything you can also contact the FCA.
Work out when to use the Firm Checker – signs you’re being scammed
- An offer which is too good to be true – look at how the promised returns compare with the average annual return from the stock market (roughly 7%) and be wary of anything offering ‘guaranteed returns’. In investing, little is ever guaranteed.
- Being contacted out of the blue – whether by text, post, email, social media or in person.
- Being pressured to act quickly – with a bonus or discount available if you invest right away or a time limit on participating.
- An ‘exclusive’ offer – you might hear you’ve been specifically chosen for an opportunity and be told to keep it under wraps.
- Being flattered – a fraudster might try and get you onside by complimenting your financial acumen or some other quality.
Tom Sieber: Content editor
Tom Sieber is AJ Bell's Content Editor. He was previously the Editor of Shares Magazine. He has been with the business since 2012.
Tom is a regular contributor to the AJ Bell Money & Markets...
