Rise and rise of al­ter­na­tive in­vest­ment schemes

> Grow­ing calls for govt to have greater con­trol of non-reg­u­lated ac­tiv­i­ties

The Sun (Malaysia) - - SPEAK UP - BY LEE WENG KHUEN

PETALING JAYA: Al­ter­na­tive in­vest­ment schemes, which of­fer “guar­an­teed” and higher re­turns than con­ven­tional in­vest­ments, are get­ting in­creas­ingly pop­u­lar, as ris­ing liv­ing costs prompt the man in the street to ig­nore the risks in­volved with such claims.

Dig­i­tal cur­ren­cies, for­eign ex­change and bi­nary op­tion trad­ing are among the most sought-af­ter al­ter­na­tive in­vest­ment schemes in the mar­ket, of­fer­ing 30% monthly re­turns on cap­i­tal in some cases and guar­an­teed 10% re­turns in oth­ers.

One such in­vest­ment that has “pros­pered” over the years is a dig­i­tal currency called Mcoin, which is is­sued by Pe­nang-based MBI Group. While Mcoin is not on Bank Ne­gara Malaysia’s con­sumer alert list, the cen­tral bank said in Jan­uary 2014 that it did not recog­nise Bit­coin (which is sim­i­lar to Mcoin) as le­gal ten­der and ad­vised the pub­lic to be cau­tious of the risks associated with the us­age of such dig­i­tal currency.

Mcoin is ac­cepted at many places in Pe­nang, in­clud­ing MBI’s “flag­ship store”, M Mall, which is ad­ja­cent to Pe­nang Times Square. In­ter­est­ingly, the coins can be used to make par­tial pay­ment for se­lected cars and prop­er­ties, which are show­cased at the mall.

An econ­o­mist who de­clined to be quoted ques­tioned whether al­ter­na­tive in­vest­ment schemes can be called “in­vest­ments”, as they must be sup­ported by an un­der­ly­ing as­set.

“For a proper/de­posit-tak­ing in­vest­ment, you need to have an un­der­ly­ing as­set for val­u­a­tion pur­poses. Ac­tu­ally, this kind of thing is il­le­gal. So far, be­cause of the grey area, there are loop­holes.

“None of the in­sti­tu­tions want to be re­spon­si­ble, that’s why you’ve things like these hap­pen­ing in this coun­try. No one is su­per­vis­ing these al­ter­na­tive in­vest­ments,” he told Sun­Biz.

There have been grow­ing calls for the govern­ment to have greater con­trol of non­reg­u­lated in­vest­ment ac­tiv­i­ties. How­ever, one is­sue seems to be the ju­ris­dic­tion the al­ter­na­tive in­vest­ment falls un­der.

When con­tacted, Bank Ne­gara Malaysia said these al­ter­na­tive schemes are not un­der its purview. The Se­cu­ri­ties Com­mis­sion only reg­u­lates cap­i­tal mar­ket in­stru­ments.

The econ­o­mist stressed that when it comes to de­posit-tak­ing, it has to be sub­ject to cer­tain rules and reg­u­la­tions to pro­tect de­pos­i­tors’ in­ter­ests.

For in­stance, he said, the pric­ing of trust funds is based on a set of stocks and bonds.

“And then there is a trans­par­ent mech­a­nism whereby you trans­late into your unit price on a daily ba­sis. So the unit is the un­der­ly­ing as­set,” he ex­plained.

The econ­o­mist said he is un­sure whether all the al­ter­na­tive in­stru­ments in the mar­ket are trans­par­ent enough in their trad­ing.

“It may start off as a means of pay­ment, but when you start to take de­posits, that is when the risk comes in. Be­cause of de­posits, you may have that type of pyra­mid scheme.

“I can al­ways draw on more de­pos­i­tors to come in, then I pay off the ear­lier sub­scribers. Then where does it end? Where is the

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