Investment schemes

Why this risk matters

  • The promoters of potentially fraudulent investment schemes often try to legitimise them by involving solicitors and law firms.
  • All solicitors must know the signs of dubious investment schemes to avoid becoming involved.
  • The promoters often tell investors that the solicitor’s insurance and the Compensation Fund will protect their investment. This is not necessarily true.
  • If they agree to move money through their client account, solicitors can find themselves in breach of our Accounts Rules. These do not allow solicitors to provide banking facilities.

Trends

  • Fraudulent investment schemes have many features in common, notably that they offer unrealistically high returns.
  • Examples where a solicitor or law firm has been used to legitimise dubious or potentially fraudulent investment schemes include:
    • new build property abroad – often described as “off-plan”
    • hotel room leasing
    • bank instrument trading
    • carbon credits
    • diamond trading.
  • We have seen an increase in reports of banking facilities being provided through client account over the last three years. These reports can lead to us discovering a possible fraud.

Actions

  • Solicitors and firms must not become involved in dubious or potentially fraudulent investment schemes.
  • Good practice includes:
    • reading our latest Warning Notice on conveyancing investment schemes
    • reading all of our Warning Notices and our paper on investment fraud
    • carrying out due diligence on any promoter of an investment scheme
    • not allowing the client account to be used as a banking facility
    • not agreeing to give artificial advice or services which would give the false appearance of an underlying legal transaction
    • remaining independent of a client
    • not giving anyone the impression that they are a client if they are not
    • not taking unfair advantage of people
    • get advice from our Ethics Guidance team to understand your obligations and help with dilemmas.
  • The Financial Conduct Authority’s Scam Smart page also contains advice on recognising the warning signs of investment fraud.

Further information