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Proliferation Of Financial Chiringuitos In The Heat Of Covid-19

The financially difficult moments are the best scenario for its multiplication . After the coronavirus pandemic hit Spain and, with the health emergency, also left an economic crisis full of unknowns , the National Securities Market Commission (CNMV) has not stopped issuing warnings about financial entities that operate in Spain despite not having the authorization to do so.

They are the so-called financial chiringuitos. Despite many times displaying a very professional appearance, these are actually activities whose sole objective is to deceive the client with false prospects for miracle investments, to finally keep their money.

From March 1 to June 30, the supervisor uncovered 134 of them, 34% more thanin the same period last year and 7% more than in the previous four months.

” The economic crisis is a breeding ground for financial beach bars, ” underlines the spokesperson for the Organization of Consumers and Users (OCU), Ileana Izverniceanu.

“The National Police dismantles them, but others always emerge. Hence the importance of being alert, as there are many ways they take to dupe new investors ”, he adds.

The first mistake to avoid is trusting in the fulfillment of some formal requirements that the company exhibits. “You should not get carried away by appearance, that it is registered as a company in the Mercantile Registry does not change anything”, Izverniceanu emphasizes.

The problem, in a financial bar, is that nobody watches over their activities or their solvency. In addition, in the event of bankruptcy or fraud, you will not be able to count on any type of institutional support, so the OCU strongly discourages operating with these companies, “due to the high risk of deception and the absolute lack of guarantees,” insists the spokesperson.

To unmask a potential financial chiringuito, the first reflection should be to check if the company in question is among the operators authorized by the CNMV. The fact that there is a warning on behalf of the company by this body or other supervisors is reason enough to dismiss it.

Since deception almost always comes through the internet, Izverniceanu also suggests not being distracted by the way in which they are usually presented.

“They are web pages that simulate the operation of markets with an attractive design and in which apparently customers can open an account and operate virtually, although in reality no investment is made, “explains the spokeswoman.

In this way, beyond appearances, you must always pay attention to the most important thing: check that behind the screen there is an entity registered with the CNMV .

The supervisor describes on his website the techniques used by the financial bars to deceive the user and that, if they were detected in a specific case, they should trigger all the alarms.

If they offer you investment possibilities based exclusively on telephone calls or emails without your prior consent or through psychological pressure techniques aimed at making you make an immediate decision or which leverage your personal affinity with the interlocutor, it is better to distrust.

Another situation in which rejection will be de rigueur is the proposal to participate in a pyramidal remuneration system , in which the benefit that can be obtained depends almost exclusively on the capital invested by other investors.

Another of the hooks is to present the user with unique and exceptional investment opportunities, with promises of high returns linked to little or no risk. It must be realized that “these exorbitant returns are very far from the market average,” warns Izverniceanu, and, therefore, are not credible. More profitability is always associated with more risk. The rest is called a scam.

Likewise, when it comes to avoiding falling victim to a financial bar, it is very important to take an active attitude.

“Ask questions about the characteristics of the service and the investment that are being proposed to you and obtain information in writing,” they suggest on the CNMV website, where they also advise paying close attention to the magnitude of commissions and expenses and making sure that the Products offered actually exist, contrasting the information that the entity provides on the price of the securities it intends to sell.

Nor should the lack of questions from the entity to the user be overlooked. When they offer a product, authorized financial intermediaries are obliged to evaluate whether it is suitable for their client, assessing their experience and knowledge, and whether it is suitable for the financial situation they present and their investment objectives.

So if they don’t give you a questionnaire, run away.

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