The Securities and Exchange Commission (SEC) has warned members of the public against buying ponzi or pyramid schemes not approved by the commission.
The Director General of SEC, Mounir Gwarzo, gave the advice while speaking on the News Agency of Nigeria (NAN) Forum in Abuja on Sunday.
“Those pyramid schemes have not been approved by SEC, and we have been telling investors that anybody that is selling any scheme that is not approved by SEC, investors should not buy.
“If they buy then they are on their own because people are being pushed to buy those kinds of schemes.
“And I think it is also a fault on our own parts because by the time somebody tells you that if you buy this thing you will get 50 per cent discount, you know it is not true.
“So we too as individuals do not have to be greedy, because it is all driven by greed.
“How can somebody give you 50 per cent return? Where is he going to get the 50 per cent from?
“Where is he going to put the money? What is he going to do?
“And this has been the trend that we have seen in recent times and we have been continuously telling people through radio jingles not to accept all those schemes not sanctioned by SEC.”
NAN A Ponzi scheme (also a Ponzi game or a Ponzi) is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources.
A Pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does, on a mistaken belief in a nonexistent financial reality.
Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
Ponzi schemes occasionally begin as legitimate businesses, until the business fails to achieve the returns expected.
The business becomes a Ponzi scheme if it then continues under fraudulent terms.
Whatever the initial situation, the perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme.
The scheme is named after Charles Ponzi, who became notorious for using the technique in 1920.
The SEC DG advised Nigerians not to subscribe to any financial investment plan without first checking the registration status of the operating company on the commission’s website.
Gwarzo added that even if the company was registered with SEC, potential investors should endeavour to find out from the commission whether the company’s activities had been approved by the commission.
He said the commission was collaborating with the police and other relevant law enforcement agencies to check the activities of the operators of such schemes.
