Would you get into a car with an unlicensed driver? Most likely not! Would you get advice from an unlicensed investment adviser? Hopefully not!

The Securities Industry Act 1983 (SIA) requires licensed investment advisers, among others, to provide advice that is suitable for their clients. To do this, investment advisers are expected to take all reasonable steps to know their clients’ background, especially their investment needs and risk profiles. A failure to follow this rule is an offence under the SIA.

Be aware that there are some unlicensed investment advisers who do not comply with this requirement and may give investment advice which can be detrimental to an investor’s investment objectives and needs.

Why license?
The SIA requires all investment advisers to be licensed. The licensing requirement is an important investor protection mechanism. Before a licence is issued, the Securities Commission (SC) determines the suitability for an investment adviser by assessing, among others, his/her qualifications and financial resources. The SC will also check whether he/she has any criminal records. Usually, an unlicensed investment adviser does not fulfil these requirements.

Using diverse communications channels
Lately, unlicensed investment advisers have been using diverse communication channels, such as short messaging services (SMS), web pages, e-mails and seminars to provide or distribute their illegal services. To promote their services, they advertise in the local dailies and on the Internet. Although the SC has taken and will be taking the appropriate actions against them, investors must also do their part by refraining from the services of unlicensed investment advisers.