Investor Protection for Expats
What Happens If Something Goes Wrong?
As soon as you transact business with a company which is based overseas you can no
longer rely upon the rules and regulations to protect you in your home country. Moving overseas makes this an even
more cut and dry situation – if you move to country X and open a bank account there, you are going to have to rely
on the consumer protection arrangements in that country to protect you and your money. Unfortunately, many
expats are caught unawares by the
lack of regulation and protection for the unwary investor or consumer of financial
|Look carefully before you move overseas at how your
investments will be protected
in the new country of your choice.
Assess the Level of Investor
Protection in the New Country
Many countries have a mature and well-developed system of consumer and investor
protection already in place and in certain instances the level of protection and compensation may exceed that in
your home country. The two principal areas to consider are the level of banking controls and
regulation and the same again for investments. Specifically, you should look at the levels of mandatory,
government backed compensation arrangements in place and also whether these protections cover non-citizens or
Once you have established that there is an acceptable level of investor protection
available and for which you will be covered, you should ensure that the companies you do business with are in fact
regulated by the appropriate authorities. A financial planning regulator may only cover a certain sector of the
market and you must ensure that whatever financial product you are buying is in truth covered by appropriate rules
and compensatory regime.
Dealing with Financial Companies
& Typical Scam Victims
Many jurisdictions require a company or bank to be authorized to transact
business, but just because the regulations are in place does not mean that everyone follows the rules. It is
important that you check the individual company you are dealing with to make sure they are authorized to offer
financial advice, products and services.
Most frauds or mishaps occur because unwary investors are taken in by
cold-calling, sales calls – the so-called “boiler room” scams. Boiler rooms operate legally and illegally in all
parts of the world including the US, Spain and Switzerland, though Eastern European countries. The general rule to
follow is to do business only with those companies who you know and trust and act only on the recommendations of
expert advisors who understand the market and the products being offered if they are not companies you
The typical fraud victim will surprise you – they are usually experienced
investors, aged over 40 and with an existing portfolio. The typical loss
is in the region of USD $30,000 (or GPB 20,000) and over half of victims are approached by telephone.
If you find you are the victim of a scam or have lost money due to poor advice or
high pressure sales tactics, then you need to know what the next step is. Typically, your next step will be to
assess two things – who sold you the product and who actually backs the product itself; this may be the same
company, such as when a company representative from Company Y sells you a Company Y investment bond, but frequently
an independent intermediary may be involved.
In either case, you must determine which regulatory body regulates the product
provider and the advisor and again, this may be two separate bodies or just the one. It is important that you
contact them at the earliest opportunity and establish what their procedures are for filing a complaint – some may
require a written complaint to be filed while others will process your claim over the telephone. However this is
done, you must follow their procedures or risk having your complaint and claim dismissed peremptorily.