Malaysia’s Securities Commission has plenty to say about scams these days. Since April, the regulator has issued at least six warnings for the investing public about fraudulent and unlicensed activities, and highlighted what it is doing to minimise the number of victims.
In October alone, the commission’s chairman Datuk Syed Zaid Albar gave three speeches that touched on the ‘rapid increase of scams’. When speaking at a retail investor event on 23 October, he reported that the commission had already received 370 queries and complaints about illegal investment schemes in the first nine months of this year, compared with 317 for the whole of 2019.
This trend is reflected in the commission’s investor alert list, which provides details of unauthorised websites and investment products, and names companies and individuals that have been caught carrying out regulated activities without a licence. The list had 23 new entries last year. There have been almost 100 additions in 2020 – and that figure only goes up to 3 November.
Covid trigger
Covid-19 has a lot to do with the proliferation of such scams. The commission’s pandemic-related announcements on its website include the following information: ‘There are many unscrupulous parties that are waiting to take advantage of unsuspecting individuals during these difficult times. Scammers tend to capitalise on fears and hardship stemming from major crises like Covid-19 outbreaks to manipulate vulnerable and unsuspecting members of the public.’
Another factor that encourages the rise of fraudsters is Malaysia’s current low interest rate environment, which makes too-good-to-be-true returns even more tempting than usual.
Other than educating investors and raising awareness, the regulator’s anti-scam drive includes setting up a taskforce that will investigate scams and take enforcement action against the perpetrators.
Shammers try to gain trust by presenting themselves as unbiased people who primarily want to share knowledge and bring others along on an investment journey
Shamming
However, not much has been said about something I call ‘shamming’ – that is, scamming on the pretext of sharing. Shamming is the use of the internet and social media to disseminate false or misleading information as a way of manipulating the market price of securities, particularly shares.
Shammers try to gain trust by presenting themselves as unbiased people who primarily want to share knowledge, initiate discussions and bring others along on an investment journey.
Online fraud is by no means a new phenomenon. It has been around since crooks discovered that the internet is a quick and inexpensive way to reach many potential victims. In cyberspace, it is easy to pretend to be someone else.
Game-changer
In the early days, online scams were mostly operated via email and internet forums. The popularity of social media platforms, such as Facebook, Twitter, YouTube, Instagram and WhatsApp, has changed the game by vastly expanding the playing field and giving the shammers a chance to exploit the platforms’ sense of community and spheres of influence.
Of course, not everybody who posts on social media about investments is a shammer, but the platforms are certainly convenient channels for any attempt to trigger buy or sell decisions based on lies, half-truths and poor judgment.
The Covid-19 pandemic and the recent surge of retail interest in Bursa Malaysia have made stock investing a hot topic on social media. And that is cause for concern. In March 2018, the Securities Commission warned investors over the increased use of blogs, forums and social media platforms to ‘spread false and misleading information on certain companies in order to perpetrate “pump-and-dump” schemes’.
It is time for a similar warning about shammers. Better yet, there should be a public conversation about what is needed to ensure that shamming does not harm the integrity of the capital market.
