Martin Lee @ Sg

Investing in Trees and Animals

There have been more and more kinds of alternative investments like trees and animals being sold to the public in Singapore.

Some of these investments promise investment returns of 10-20+% p.a, and a few of them even come with “capital guaranteed” tags.

It’s always a mystery to me how growing plants and rearing animals can give such high guaranteed returns after you factor in all the marketing costs to promote such investments to the public. I don’t even see real farms making such returns on their capital.

Those who are old enough might remember the ostrich scams that hit us many years ago.

The Financial Services Authority (FSA) in UK is way ahead of the curve for such schemes and have already issued a warning to the public about investing into trees and crops.

FSA’s approach is that if there is an investment that involves pooling of investor’s money, it is considered a collective investment scheme and has to be regulated and authorised.

If it is not authorised, then it is considered an unregulated collective investment scheme (UCIS). Such investments cannot be sold to the general public and can only be sold to high net-worth individuals or sophisticated investors.

Any company found to be doing otherwise will be forced to close down. For example, many land banking companies in the UK were forced to stop their operations.

Singapore’s approach is slightly different. It specifics a list of financial instruments that are regulated. This includes the usual investments like shares, unit trusts and life insurance. These regulated products can only be sold by licensed representatives who meet the prescribed requirements. Anyone who is not licensed but tries to give individual advice on them will be contravening the regulations (The irony is that you do not violate anything if you conduct a seminar to few hundred people on the same topic).

If a product falls outside this list, it is considered not regulated by MAS. The current position is that any product that does not fall under the scope of MAS is not up to them to regulate and hence they will not stop companies from selling sell such products. For example, land is considered a real asset so any sale is like a property purchase on a willing buyer and seller basis.

So, any consumer who purchases an unregulated investment might have very minimal protection from our laws. If something goes wrong, an investor will need to resort to his or her own legal actions.

So please think twice before you decide to invest into any unregulated investment sold in Singapore.