Ponzi Schemes and Scam Activities During and Post COVID-19

As the world grapples with the fight against the deadly COVID-19 pandemic which has not only claimed lives and affected human livelihood, but also ravaged economies, the Capital Markets Authority (CMA) continues to stand with you all in this fight and encourage the capital markets fraternity to play our individual roles alongside what our Government is doing to manage the situation. Additionally, we would like to re-assure all our stakeholders and the general public that we are continuing to monitor all activities in Uganda’s capital markets to ensure order, fairness and transparency. Our primary objective remains protection of investors at all times.

Given the likely economic impact on business enterprises and the economy, a number of people are bound to be desperate for survival owing to the spillover effects of the epidemic which include loss of jobs and reduction/ loss of incomes. The Authority is aware that during such challenging times, unscrupulous individuals tend to take advantage of the unsuspecting public and devise schemes to defraud them of the limited savings they have left to cater for their basic needs.

Such devious characters are likely to emerge with “too-good-to-be-true” financial schemes which promise quick recovery and abnormally high returns on investment.Usually, they will ensure that their first clients are rewarded handsomely so that they serve as testimony to lure more people to invest. Unfortunately, once they have collected a substantial amount of money from various individuals,such ponzi schemes will fail to meet their obligations and consequently, vanish with people’s savings.

We strongly caution the public to be mindful of such schemes, especially during and post CORVID-19 and, avoid falling prey to such selfish characters whose interest is to take advantage of already distressed people.

So,what are some of the red flags that could indicate that a scheme may be looking to defraud you?

If the marketing of the scheme is too aggressive, i.e. making regular cold calls, numerous unsolicited sms and Whatsapp messages, etc; and yet the firm’s representatives are not willing to address all the queries you have before you invest;

If the scheme claims to be licensed or approved by an Authority or agency unknown to you and cannot produce proof that they are licensed to operate in Uganda;

If the return on investment is “too good to be true”. For example, if they promise returns which are way above what the rest of the market if offering on the same product; or if they promise high daily/ monthly returns or dividends

If what you are buying or investing in sounds ambiguous and does not make sense to you;

If they ask you to make a down payment – usually an affordable sum of money so that they can register you or send information about their product;

If the scheme sounds like it is a causal-related scheme that aims to help disadvantaged or underprivileged people;

If the scheme’s major claim to legitimacy is their affiliation to influential persons in the political, religious or business space;

If the firm /scheme claims to be registered outside Uganda and has no clear operations as per the Ugandan laws;

If the scheme operators use force or intimidate you into investing in their scheme products.

Therefore,before investing through any scheme, always endeavor to establish that:

The sponsor of the product or security is licensed or approved by CMA or any other clearly known regulatory body in Uganda. An up-to-date list of firms/ schemes approved by the CMA can be accessed from our website, www.cmauganda.co.ug;

The sponsors or advisors provide you with balanced information about their product, which includes both the advantages and disadvantages of undertaking the investment;

While investing in any product, avoid making direct payments to the scheme representatives. All deposits should be made through traceable financial channels such as the bank,mobile money, etc;

If you are not sure about a scheme’s legitimacy, contact the CMA or any other financial sector regulator to confirm its existence before you place any investments with them;

Always seek investment advice from the CMA licensed investment advisors, a list of which can be accessed from our website.

CMA also reminds existing investors in securities to be cautious of the decisions they take during this period especially with regards to buying and selling of securities. As a result of the pandemic, stock prices may be affected. It is therefore imperative that before making the decision to trade, one seeks sufficient investment advice from our licensed intermediaries and ensure to sign a sell order or buy order form (or its equivalent) before any trade is executed on your behalf.

Investors in Collective Investment Schemes (CIS) or unit trusts that are approved by the CMA are also advised to seek ample investment advice before any trade is executed by their CIS Managers.

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