Beware of wonder banks, SEC warns investors 'As claims against Ponzi scheme hits N106bn

Perturbed by claims against wonders bank in the domestic economy, the Securities and Exchange Commission (SEC) has warned investors in the country to be cautious and vigilant when seeking to invest in a scheme that looks too attractive.The Commission said that so far, total claims against wonder banks now stood at N106 billion, even as it further warned investors against the use of non registered capital market operators to execute their investment needs.The Director-General, SEC, Ms Arunma Oteh, who gave the warning at an investor outreach in Onitsha on Friday, said, 'The Commission does not recognise non registered capital market operators whose track record we don't have and may not be able to prosecute in case they go against the rules and regulation guiding the capital market.She noted that, 'Investors should patronise registered capital market operators that are duly registered by SEC, Nigerian Stock Exchange (NSE) and are also licensed by the Chartered Institute of Stockbrokers (CIS). 'The SEC is the apex capital market body whose primary role is to regulate and develop the market. It has responsibilities to protect investors and that is why we are advising the investors to patronise registered capital market operators that we can easily apprehend whenever they defraud investors or commit other malpractices. We have dragged some of them to Investment and Securities Tribunal (IST) so that they can be punished for defrauding innocent investors.'While explaining the fraudulent practices in the country, she said a Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organisation.In her words, 'Ponzi schemes usually attract new investors by offering higher returns, in the form of short term returns that are either abnormally high or unusually consistent. The perpetration of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.'She revealed that the Ponzi scheme is otherwise known as wonder banks in Nigeria, noting that since early 1990's illegal investment scheme had continued to exploit the naivety of investors, in their quest to become instant millionaires.While responding to investors who were victims of the Wonder banks, the SEC boss, said, 'The SEC will try to see if the fraudsters will be apprehended because the Commission is there to protect investors, though by law the SEC is responsible to regulate only registered operators in the market.'For investors whose shares were illegally sold by registered stockbrokers without their consent, Oteh advised them to make formal complaints.
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