In its story of March 26, 2009 ‘35% scheme man says he’ll make good’ SN reported that the operator of the ‘vegetables for export’ scheme stated, “They will be repaid,” thereby appearing to admit the existence of a scheme. This scheme appears to be operating in breach of the Securities Industry Act 1998. In my opinion this scheme falls under the definition of a collective investment scheme. Such schemes are classed as securities under this act. Two immediate sections of the legislation spring to mind:
S57 (1) – “no security shall be offered to the public… unless it is registered with the Council”
S61 “no person shall distribute a security unless a prospectus… has been filed with and a receipt therefore issued by the Council.”
Even if the investors are repaid the perpetrator of the scheme should be investigated for these alleged breaches. Failure to act by the relevant authorities would send the signal to others that as long as they repay they can operate such schemes with impunity. There is a proliferation of investment schemes with targets ranging from the sophisticated to the unsophisticated. Unfortunately, as we have seen recently with the Madoff affair even registered entities have been found to be operating fraudulent schemes. However, no scheme should be allowed to operate unless it is registered with the relevant authorities.
A public awareness campaign is needed to warn those that might be attracted to such schemes that unless the scheme is registered it is operating illegally.
Patrick van Beek