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If the business venture is too good to be true, it is a lie

Ugandans are hospitable, trusting, and very entrepreneurial. However, these noble qualities have predisposed us to a litany of scams that include the Cowe scheme which promised 54 per cent return per month, and the Bridgewater scheme which promised $1.25 (Shs 4,478.29) every day.

The Covid-19 pandemic has brought to the fore the determination of mankind to survive by whatever means possible. With the effects of the pandemic trickling in, fraudsters have taken advantage and gone to work, cooking up all sorts of schemes to rid the public of all that they have stashed away in the last three years.

It is disheartening to hear the stories of people who have fallen prey to scams. Some of these scams come dressed as sophisticated financial products, offering returns that individuals can only dream of.

In law, the term “caveat emptor’’ is a Latin word that warns a buyer in a sale of goods contract to draw the attention of the purchaser to the state of the goods being bought. It is the responsibility of the buyer to be aware of what he is purchasing.

When it comes to our hard-earned money in tough economic times, I cannot shout it loud enough, “caveat emptor’’. For starters, anyone who claims to be selling a financial product should be licensed by a regulatory agency.

If someone is taking money from you to invest in stocks or shares, that entity should be licensed by the Capital Markets Authority as a stock broker and must be in possession of a valid license. Consumers should insist on taking a photo of that license and crosschecking on the CMA website to see if such persons are indeed licensed.  

The CMA offices and the telephone lines are always open to anyone who would like to verify information prior to making an investment in securities. Make use of it. If buyers can take just that one easy initial step to ask if the seller of financial services is licensed, it would save them lots of money.

The second step is to understand the product that you are being sold on how the returns are made. Ponzi schemes “rob Peter to pay Paul’’. If you have invested in a Ponzi scheme before, think back at the hook.

A friend of yours put his money in and doubled it and told his friend who did the same thing, the investors are not making any effort to invest in any meaningful ventures but are simply using you and your network to enrich themselves and pay the next person in the chain until it goes burst.

If only the buyer would stand back, reflect and ask questions like… “so, explain to me in a simple way what this product is, who regulates you and your product, what you invest in and how you make a profit for your investors?’’

If you don’t understand the response, then do not put your money in it. There will be a better investment tomorrow, let it go! Losing money because you are not asking the right questions is a sign of poor financial stewardship and causes great financial stress to you and your loved ones. Let us start asking basic questions before we part with the cheque!

The third thing is ‘’be patient’’. We often say, “Rome was not built in a day’’but we try to amass wealth using all the tricks known and end up being fleeced. He who gathers money little by little makes it grow. Invest what you have as long as you can with regulated entities and keep on investing.

Delay gratification and do not be greedy, let it grow day by day. That’s how wealth is built it is built over time and not in a day. Fraudsters ordinarily exert pressure to get you to commit financially with little or no information.

Do not give in to this. Take your time, be slow and steady like a tortoise, you will still get to the financial destination you are trying to get to.

The author is director Legal and Board Affairs, Capital Markets Authority (CMA).

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