Ce­cila Melville

Over the years, there has been an in­crease in the num­ber of com­plaints from peo­ple who have fall­en vic­tim to in­vest­ment scams op­er­at­ing in T&T. The more com­mon scams are the ponzi scheme and the pyra­mid scheme. How­ev­er there are nu­mer­ous types of scams with the main aim be­ing to dupe in­vestors.

In­vesto­pe­dia de­fines a ponzi scheme as an in­vest­ment scam that pays ear­ly in­vestors with mon­ey tak­en from funds re­ceived from lat­er in­vestors to cre­ate an il­lu­sion of big prof­its.

A pyra­mid scheme re­lies on re­ward­ing ear­ly in­vestors to re­cruit more in­vestors but col­laps­es when the sup­ply of po­ten­tial in­vestors dwin­dle. In both scams, in­vestors funds are not in­vest­ed in any pro­duc­tive ac­tiv­i­ty or in­vest­ment that can yield the promised re­turn. In ad­di­tion, the promised re­turn is usu­al­ly sig­nif­i­cant­ly above the av­er­age re­turn ob­tained from oth­er in­vest­ments. There­fore the in­vest­ment is un­re­al­is­tic and clear­ly a case of the of­fer be­ing too good to be true!!

Ad­vances in tech­nol­o­gy, es­pe­cial­ly the emer­gence of AI tech­nol­o­gy, have made it pos­si­ble for fraud­sters to mar­ket these schemes on­line there­by al­low­ing them to reach a lim­it­less num­ber of per­sons.

In ad­di­tion, in­vest­ment scams tend to pro­lif­er­ate when the econ­o­my is de­pressed as per­sons seek quick re­lief from their eco­nom­ic pain. Un­for­tu­nate­ly, these schemes and oth­er “get rich quick schemes,” leave a great deal of suf­fer­ing in their wake as many per­sons are robbed of their in­vest­ments.

So how does one stop this scourge? What is the re­spon­si­bil­i­ty of in­di­vid­u­als? The reg­u­la­to­ry au­thor­i­ties?

Well much can be said about the need for in­di­vid­u­als to take per­son­al re­spon­si­bil­i­ty in their in­vest­ment choic­es. This ap­proach as­sumes that every­one is fi­nan­cial­ly lit­er­ate and is able to eval­u­ate the ben­e­fits and RISKS as­so­ci­at­ed with a fi­nan­cial prod­uct be­fore mak­ing a de­ci­sion to in­vest.

How­ev­er, the re­al­i­ty is that many per­sons, even in more ad­vanced coun­tries, are not fi­nan­cial­ly lit­er­ate. More im­por­tant­ly, fi­nan­cial mar­kets are char­ac­terised by in­for­ma­tion asym­me­try and a lack of trans­paren­cy.

Of­ten, peo­ple who sell in­vest­ment prod­ucts have a more knowl­edge of the risks as­so­ci­at­ed with the prod­ucts than po­ten­tial or ex­ist­ing in­vestors. The lack of trans­paren­cy in fi­nan­cial mar­kets puts in­vestors at a se­ri­ous dis­ad­van­tage as they may be ex­posed to un­fair and harm­ful prac­tices by the per­sons/en­ti­ties that sell these prod­ucts. Hence the reg­u­la­tion of fi­nan­cial mar­kets is vi­tal in re­dress­ing this im­bal­ance and safe­guard­ing the in­ter­est of in­vestors.

In 1995 the Gov­ern­ment of Trinidad and To­ba­go en­act­ed the Se­cu­ri­ties In­dus­try Act, which was pro­claimed in 1997. This leg­is­la­tion es­tab­lished the T&T Se­cu­ri­ties and Ex­change Com­mis­sion (TTSEC) and gave the agency lead re­spon­si­bil­i­ty for reg­u­lat­ing the se­cu­ri­ties mar­ket. The leg­is­la­tion gov­ern­ing the se­cu­ri­ties mar­ket has been amend­ed to bring it in line with in­ter­na­tion­al stan­dards.

The Se­cu­ri­ties Act of 2012, which re­placed the 1995 leg­is­la­tion, has as its stat­ed ob­jec­tive to pro­vide pro­tec­tion to in­vestors from un­fair, im­prop­er or fraud­u­lent prac­tices; fos­ter fair and ef­fi­cient se­cu­ri­ties mar­kets and con­fi­dence in the se­cu­ri­ties in­dus­try in T&T; and to re­duce sys­temic risk.

In 2022, the Se­cu­ri­ties Act of 2012 was amend­ed to ex­plic­it­ly in­clude ponzi, pyra­mid and oth­er fraud­u­lent in­vest­ment schemes un­der the reg­u­la­to­ry over­sight of the TTSEC. A new sec­tion (Sec­tion 165A) was in­sert­ed in the 2012 Act to pro­vide for the crim­i­nal­is­ing of any pro­hib­it­ed schemes name­ly ponzi and pyra­mid-type schemes. Un­der the amend­ed Act, it is now a crim­i­nal of­fence to es­tab­lish, op­er­ate, ad­ver­tise or par­tic­i­pate in these pro­hib­it­ed schemes. It is al­so an of­fence to in­vite per­sons to join a pro­hib­it­ed scheme.

The Act es­tab­lish­es penal­ties where a per­son is con­vict­ed of these of­fences (See Ta­ble).

While the TTSEC’s web­site en­cour­ages the pub­lic to re­port in­for­ma­tion about these pro­hib­it­ed schemes, it is clear that the se­cu­ri­ties leg­is­la­tion has as­signed the re­spon­si­bil­i­ty for over­sight of the se­cu­ri­ties mar­ket and for en­force­ment ac­tion against breach­es to the TTSEC. There­fore, the TTSEC is re­quired to un­der­take its own mar­ket sur­veil­lance and is ob­lig­at­ed to take ef­fec­tive ac­tion to pro­tect in­vestors from firms/in­di­vid­u­als that sell pro­hib­it­ed schemes.

In ad­di­tion, the Se­cu­ri­ties Act re­quires all en­ti­ties and their agents that en­gage in the pro­mo­tion, mar­ket­ing or sale of se­cu­ri­ties (in­clud­ing in­vest­ment prod­ucts) to be reg­is­tered/li­censed with the TTSEC un­less an ex­emp­tion is grant­ed.

The most re­cent scan­dal en­gag­ing the at­ten­tion of the pub­lic is an in­vest­ment scheme in cryp­tocur­ren­cy and for­eign ex­change op­er­at­ed by Tril­lions Sys­tems Ltd (tril­lions).

News­pa­per re­ports state that Tril­lions was set up in mid-2022 and to date has at­tract­ed over 3,000 per­sons who have in­vest­ed mil­lions. Many of these per­sons have com­plained that they are yet to get back their in­vest­ment and the promised re­turns.

Re­cent­ly news broke that the TTSEC is in the process of in­ves­ti­gat­ing this in­vest­ment scheme op­er­at­ed by Tril­lions. Giv­en that in­for­ma­tion about the Tril­lions scheme has been in the pub­lic do­main for months, it is shock­ing that the TTSEC ap­pears to have on­ly now tak­en ac­tion against this com­pa­ny. It is equal­ly shock­ing that Ker­ron Rose, the main man be­hind Tril­lions, would be al­lowed to en­gage in the tirade re­port­ed in the lo­cal news me­dia in which he showed con­tempt for the laws of T&T and the pow­ers of the TTSEC and its abil­i­ty to hold him ac­count­able.

Sev­er­al ques­tions arise re­gard­ing this sit­u­a­tion, chief among which is whether the TTSEC has act­ed ap­pro­pri­ate­ly.

Ad­di­tion­al­ly,

• ↓Why has the TTSEC tak­en so long to act?

• ↓Was the scheme man­aged by Tril­lions reg­is­tered with the TTSEC?

• ↓Is Mr. Rose or his com­pa­ny reg­is­tered/li­censed with the TTSEC to sell or man­age se­cu­ri­ties?

• ↓Does the prod­uct of­fered by Tril­lions meet the cri­te­ria for a pro­hib­it­ed scheme?

• ↓Has the TTSEC is­sued a cease and de­sist or­der to Tril­lions while its in­ves­ti­ga­tion is on­go­ing in or­der to halt the pro­mo­tion of this in­vest­ment scheme and to pre­vent the fur­ther sale to prospec­tive in­vestors?

• ↓What re­dress is open to in­vestors if it is proven that the TTSEC failed to take ear­ly en­force­ment ac­tion against Tril­lions to pro­tect in­vestors?

Giv­en the grow­ing preva­lence of ponzi schemes and oth­er in­vest­ment scams, how can we com­bat this scourge?

The first line of de­fence is that in­vestors must ac­cept per­son­al re­spon­si­bil­i­ty for their in­vest­ment choic­es. This means that per­sons must take the time to be­come in­formed about in­vest­ments and their risks.

As a rule of thumb, prospec­tive in­vestors should:

• ↓Be scep­ti­cal. If the in­vest­ment promis­es high re­turns and lit­tle risk, ap­proach with great skep­ti­cism. For ex­am­ple, if an in­vest­ment promis­es a dou­bling of your funds with­in a short time­frame but the un­der­ly­ing in­vest­ment risk is not dis­closed, then it is like­ly to be a scam.

• ↓Be sus­pi­cious of un­so­licit­ed of­fers. For ex­am­ple, be­ing of­fered an in­vest­ment via un­so­licit­ed phone calls, at your favourite su­per­mar­ket or on­line is a red flag.

• ↓Check out the sell­er. Ver­i­fy if the sell­er of the in­vest­ment is a rep­utable com­pa­ny and whether it has the req­ui­site in­vest­ment ex­pe­ri­ence and ex­per­tise. The com­pa­ny and its agents should al­so be reg­is­tered/li­censed with the TTSEC.

• ↓Ver­i­fy if the in­vest­ment prod­uct is reg­is­tered with the TTSEC. All se­cu­ri­ties/in­vest­ment prod­ucts should be reg­is­tered with the TTSEC un­less an ex­emp­tion has been grant­ed.

• ↓Un­der­stand the in­vest­ment. UN­DER­STAND THE RISKS BE­FORE YOU IN­VEST. Nev­er put mon­ey in an in­vest­ment you do not un­der­stand.

• ↓Re­port wrong­do­ing. If you think the in­vest­ment is fraud­u­lent or a scam, this should be re­port­ed to the TTSEC.

The Se­cu­ri­ties Act of 2012 and the sub­se­quent amend­ments clear­ly es­tab­lish­es the TTSEC as hav­ing ul­ti­mate­ly re­spon­si­bil­i­ty for en­sur­ing the op­er­a­tion of fair and ef­fi­cient se­cu­ri­ties mar­kets and for pro­tect­ing in­vestors from the po­ten­tial­ly dev­as­tat­ing loss­es caused by pro­hib­it­ed schemes.

The TTSEC there­fore has an oblig­a­tion to be proac­tive in its su­per­vi­sion of the mar­ket, to iden­ti­fy pro­hib­it­ed schemes and to take strong en­force­ment ac­tion against per­sons who en­gage in the sale of these schemes.

More­over, the TTSEC has a role in pro­mot­ing pub­lic ed­u­ca­tion ini­tia­tives to as­sist per­sons in mak­ing sound in­vest­ment de­ci­sions and iden­ti­fy­ing scams.

The fail­ure by the TTSEC to take ro­bust en­force­ment ac­tion against the sale of pro­hib­it­ed schemes such as ponzi and pyra­mid schemes could put in­vestors at great risk.

Fur­ther the lack of ef­fec­tive reg­u­la­to­ry ac­tion against pro­hib­it­ed scams could un­der­mine pub­lic con­fi­dence and trust in the wider se­cu­ri­ties mar­ket and may lead to calls by ag­griev­ed in­vestors for re­dress from the TTSEC. There­fore, the TTSEC is the fi­nal bas­tion in the fight against in­vest­ment scams and must take more de­ci­sive ac­tion in de­liv­er­ing on its man­date to pro­tect in­vestors.