FCA warns of potential fraud with commodity investments

The Financial Conduct Authority has issued an alert over a new commodity investment that is being offered to retail investors, warning it has not seen any “convincing evidence” there is a viable market for mainstream consumers and that there is a high potential for fraud.

In a statement on its website, the regulator said it has received a number of reports from people who have been offered the opportunity to invest in a man-made commodity called ‘graphene’, a type of carbon that “may one day be used in display screens, electrical circuits and batteries”.

The watchdog first uncovered this issue when it found evidence of a ‘graphene’ investment firm on the computers of a suspected boiler room operation, raising the prospect that the commodity could be part of a wider fraud.

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Boiler rooms are characterised by high-pressure cold calling sales tactics and in many cases they have been used to generate money for investments that do not exist.

According to the regulator, retail investors should be wary of any investment in any esoteric commodity such as rare earth metals or carbon credits.

In a statement the FCA said: “We believe that the same firms that have sold other high-risk, dubious products such as carbon credits, rare earth metals and overseas land and crops, are now trying to sell grapheme.

“We are yet to see any convincing evidence that there is a viable market for retail investors to make money from investments in rare earth metals.”

The FCA added that callers prompting investments in ‘graphene’ are using “dubious, high-pressure sales tactics and targeting vulnerable consumers”.

Furthermore, the regulator warned there is a “strong possibility” of fraud because ‘graphene’ is unregulated and it is difficult to confirm if you have bought the genuine product.

If investors buy an investment product from a firm that is not authorised by the FCA, investors will not have recourse to the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong.