High-return investments carry high risks – SEC counsels

The Securities and Exchange Commission (SEC) wants the public to differentiate between depositing money in a bank and buying into a high-return investment scheme.

One is a high-risk, high-return decision, the other is not.

Director General of SEC, the regulator of the securities market, Daniel Ogbarmey Tetteh, says very often people forget the risks associated with investment – confusing it with merely depositing their money in a bank.

“One thing that people must know is that when you talk about investment, you are taking some risk. Every investment carries a degree of risk. If there is a risk, it means that there is also the possibility that you will lose part of your money or investment,” he said.

Mr Tetteh made the comments on Wednesday when he appeared on Joy FM’ s Super Morning Show to talk about the work of the Commission and increasing complaints from some investors that they are unable to redeem part or all of their investments due to liquidity constraints of investment firms.

Complaints

The SEC office in Accra has been inundated in recent times with complaints by the investing public that many market operators are failing to honour their obligations to them.

State-run Graphic Business reports that some of the complainants have been chasing their investments for more than 24 months in some cases, but 13 months on the average.

“They [investment firms] came with sweet words and I trusted them because the returns they quoted for me was within range and, therefore, I had no cause to doubt them. At least I knew that if they quoted interests a little over the prevailing Treasury bill rate, that should be fine by me and I heeded,” the business newspaper quoted a retired woman in an April 9 report.

The SEC has, however, been taking firm steps against some investment firms that appear on its complaints radar.

The Commission recently directed Gold Coast Fund Management Ltd to cease collection or receipts of new funds from the public.

In a statement, SEC said, “The Commission has directed Gold Coast Fund Management Ltd to cease collection or receipts of new funds or investments from the investing public until all clients and investors with outstanding matured investments have been paid or mutually agreed settlement terms reached.”

But at least GHS 200 million remained locked up in trouble gold dealership, Menzgold Company Limited.

Menzgold investors were promised 7% to 10% monthly returns on special gold collectibles bought and deposited with the company.

However, the company began crumbling in September 2019 after the SEC ordered it to shut down gold collectibles operations.

Already 53 soldiers, in January 2019, have sued Menzgold Ghana Limited, for failing to pay back ¢2.5 million in investments.

Understand investment

The SEC boss wants the investing public to understand the basic principle of investment and act cautiously.

“The principle is this: the higher the risk, the higher the return. What this means is that when you, for instance, are investing in a vehicle or investment that carries high returns, then it means that there is a high-risk…that’s different from when you take your money to deposit-taking institution like a bank,” he advised.

Daniel Ogbarmey Tetteh wants investors to know that once their money is working for them, it will entail some risk. “So if the risk is high, then you could lose all or part of your money. So I think that understanding must also be there.” 

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