If someone is offering a legitimate investment opportunity for your clients, they should be prepared to verify their credentials and satisfy requests for information.
There are some simple and easy ways for a new adviser to protect themselves at the outset, before recommending to a client that they hand over any money.
Most investment schemes or companies will confirm that they are authorised by the FCA somewhere on their website or documentation. Do not just take that at face value.
The FCA maintains a register of regulated individuals and companies which can be accessed online, without any charge.
If someone claims to be authorised by the FCA but does not appear on that database, then stay away.
Any adviser can also make some enquiries themselves through the internet about the individuals or company they are dealing with, but websites are easily set up or manipulated so do not rely on them alone.
Sources such as Companies House or the Insolvency Service are government organisations, which hold a lot of data on corporate entities and directors.
Check the websites of those entities for records of the company or individual involved; if you're handed a prospectus with a company name which you cannot subsequently find on Companies House, that is a red flag.
Information on personal and corporate insolvencies is also available online and if an individual is regularly involved in insolvencies, then that may also serve as a warning.
These investment schemes should also come with some subscription agreement or shareholder's agreement (depending on the type of investment).
Make sure you read the document and ask about any clauses you don't understand before recommending that your client sign the terms.
Any legal adviser should be able to highlight unusual or concerning clauses, and their presence in these documents should also put you on alert.
There should also be notice provisions which explain when and how you and the client will receive updates - if there aren't any, ask for them.
Advisers who are long in the tooth know the promise of unrealistic or guaranteed returns should always be a red flag, so this should lead you to being overly cautions when verifying the information.
Finally, take notes and keep a record of all of the steps in your due diligence process, including calls or discussions with the person or people behind the investment.
