Many investors in Malaysia are angry at the action taken by action taken by Bank Negara to close down the operation of a gold trading firm called Geneva. This company also operated in Singapore. Some investors had lodge complaints that the company failed to pay the monthly interest or honor the payback guarantee. One investor filed a suit in court in Singapore and the company did not attend court to respond to the complaint. The Commercial Affairs Department also raided this company.
The investors were promised a monthly payout of 2% of their investment and a full refund at the end of one or three months. How is the company able to earn 24% a year, just to pay the "interest" to the investors? They also have to pay for their marketing and administrative expenses. The investors may think that the money is made from "trading in gold".
Trading is not a safe bet, and any trader can make or lose money on trading. Even investing in gold is not a safe bet, as the price of gold may fluctuate and is volatile. If the company is offering a chance for investors to trade in gold, it is a legitimate business. But the company cannot guarantee the interest payout of 2% a month or a 100% refund of the investment.
When the company makes such a guarantee, it is no longer offering a trading scheme. It is now taking a deposit and paying out a guaranteed rate of interest. This activity becomes "deposit taking". There is a law, in perhaps all countries, that companies that takes deposits should get a licence from the authority. These companies will be closely supervised to ensure that they have sufficient funds to meet their obligations. The law is strict on how the money collected should be invested and be kept accountable.
When a company collects deposits and is not regulated, there is a risk that they can siphon off the money outside of the country and close the company down causing the investors to lose all of their invested sums.
The company will be able to pay the monthly interest and capital refund, if they continue to collect money from new investors to pay off the old investors. So long as the inflow is bigger than the outflow, the operation can continue. But the obligation of the company will continue to grow exponentially. This is, in essence, a Ponzi scheme. See http://en.wikipedia.org/wiki/Ponzi_scheme
The authorities in Malaysia and Singapore faced a dilemma. Should they close their eyes and allow the company to expand their operations? Should they step in and investigate if the company has sufficient funds to meet their obligations? Should they charge the company for collecting deposits without getting a licence?
It is necessary for the authority to act. They should have done so earlier, when the money involved was still quite small. Now, it has grown to be quite a large sum, involving many investors. If nothing is done now, it could become even bigger.
The investors were promised a monthly payout of 2% of their investment and a full refund at the end of one or three months. How is the company able to earn 24% a year, just to pay the "interest" to the investors? They also have to pay for their marketing and administrative expenses. The investors may think that the money is made from "trading in gold".
Trading is not a safe bet, and any trader can make or lose money on trading. Even investing in gold is not a safe bet, as the price of gold may fluctuate and is volatile. If the company is offering a chance for investors to trade in gold, it is a legitimate business. But the company cannot guarantee the interest payout of 2% a month or a 100% refund of the investment.
When the company makes such a guarantee, it is no longer offering a trading scheme. It is now taking a deposit and paying out a guaranteed rate of interest. This activity becomes "deposit taking". There is a law, in perhaps all countries, that companies that takes deposits should get a licence from the authority. These companies will be closely supervised to ensure that they have sufficient funds to meet their obligations. The law is strict on how the money collected should be invested and be kept accountable.
When a company collects deposits and is not regulated, there is a risk that they can siphon off the money outside of the country and close the company down causing the investors to lose all of their invested sums.
The company will be able to pay the monthly interest and capital refund, if they continue to collect money from new investors to pay off the old investors. So long as the inflow is bigger than the outflow, the operation can continue. But the obligation of the company will continue to grow exponentially. This is, in essence, a Ponzi scheme. See http://en.wikipedia.org/wiki/Ponzi_scheme
The authorities in Malaysia and Singapore faced a dilemma. Should they close their eyes and allow the company to expand their operations? Should they step in and investigate if the company has sufficient funds to meet their obligations? Should they charge the company for collecting deposits without getting a licence?
It is necessary for the authority to act. They should have done so earlier, when the money involved was still quite small. Now, it has grown to be quite a large sum, involving many investors. If nothing is done now, it could become even bigger.
:.
0 comments:
Post a Comment