This undated photo shows a view of the Victoria Harbour in Hong Kong. (PHOTO / IC)

Hong Kong’s financial community is pushing for better investor education to contain scams, as rampant fraud in the sector has dealt a significant blow to the city’s pride of place in finance. 

Financial sector lawmaker Robert Lee Wai-wang said on Tuesday that investors should trade through licensed institutions and seek investment advice from licensed professionals, instead of trusting so-called key opinion leaders in investments on the internet.

According to the police, the number of online investment scams reported in the city rose about 1.6 times year-on-year in the first three quarters of 2023, with losses from 3,523 cases hitting HK$2.1 billion ($269 million). 

“As licensed professionals are regulated by the regulatory bodies, investors can lodge complaints with the Securities and Futures Commission through legal channels for any violation of professional conduct,” Lee said.

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According to the police, the number of online investment scams reported in the city rose about 1.6 times year-on-year in the first three quarters of 2023, with losses from 3,523 cases hitting HK$2.1 billion ($269 million). The victims ranged in age from 13 to 80, many of whom were investment consultants, accountants, and surveyors. 

Recent financial frauds that have caused a stir are nothing new. “They all use high returns and misrepresentation to lure investors, and then impose exorbitant handling fees or deliberately delay refunds to make it impossible to withdraw,” said Lee. 

Since Hong Kong began its push to build a global virtual asset hub, a string of financial scandals have centered on cryptocurrency platforms, including JPEX — an unlicensed exchange that had allegedly defrauded more than 2,500 victims out of over HK$1.6 billion. 

Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators, said the security watchdog should strengthen public education on virtual asset investment and suggested the government issue bonds in the form of security tokens, which are digital representations of ownership of assets utilizing blockchain.

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By allowing the public to invest in tokenized bonds via official channels, the city can witness a rise in public knowledge of virtual assets trading, Tang said. 

Katerine Kou, chairman of the Hong Kong Securities Association, said that experience has shown that investors are overvaluing returns while neglecting risks, and that members of the public have a responsibility to consider whether the returns claimed in the advertisements are close to a reasonable level. 

She also reminded the public to be cautious if they are asked to transfer funds to their personal account instead of a company account, or if the transferring company is not a licensed organization.