JEDDAH, 27 June 2005 — Financial experts have warned investors against giving money to individuals who claim that the money is being invested in the stock market. The individuals claim they can make twice as much as a bank investment would. These operations are illegal, Al-Watan newspaper reported, because they are not governed by any law or regulations.
People who choose this kind of investment will lose their money even if they have receipts from those who took their money. This is a scam similar to the earlier SAWA one in which alleged organizers took hundreds of millions of riyals from small investors who lost everything.
Hisham Kabbani, a financial consultant, said that collecting money from small investors under the pretense of investing it in a stock portfolio has become common. He said that there were people investing hundreds of million from abroad in the Saudi stock market. Kabbani said that the organizers had won people’s trust because of the profits they distribute. These come from the daily increase in the stock market rather than from any skill. He said that what these people do is not regulated by law and those who invest with them run the risk of losing their money very quickly.
Kabbani said, “The operations usually take place under the table between the organizer and the investor and depends on trust between the two. It is very similar to the SAWA scam.” Kabbani advised small investors to invest their money in bank portfolios because they are under the supervision of the authorities and are managed by qualified individuals and companies in order to avoid losses and to protect capital.
