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 advice.
|Look carefully before you move overseas at how your investments will be protected in
the new country
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 non-residents.
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
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
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 know.
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
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.