The number of reported financial investment-related fraud cases grew by 74% in 2018, driven by complaints about unregulated "shadow savings market" and cryptocurrency investments, revealing "cracks in the structure" of the UK's regulatory regime, according to law firm Pinsent Masons.
Research from the firm shows that the number of such cases grew to 6,890 to 31 December 2018, up from 3,950 in previous year, with retail investors plagued by the sale of unregulated products and other fraudulent activity.
Of the 6,890 cases last year, the most commonly reported were related to share and bond sales, which grew more than fourfold to 860, while the number of pyramid or Ponzi schemes reported grew from 50 in 2017 to 380 in the following year.
Fraudsters are taking advantage of investors' need for income"
The research shows that fraudsters are "taking advantage of investors' need for income", amid historically low interests, leaving their victims exposed to aggressive advertising and marketing within the "show savings market".
Data from the Financial Conduct Authority shows that it had to intervene 225 times in 2018 to tell firms to withdraw or change misleading advertising.
In January, the regulator issued a warning that some firms are engaging in "unlawful" and "misleading" marketing practices with regard to the promotion of unregulated financial products.
In recent months, Pinsent Masons said the largest proportion of complaints have been related to cryptocurrency investment scams, recovery fraud and share sales.
Many investors were caught out by a surge in Initial Coin Offerings, which enabled them to buy tokens that represent units of a future cryptocurrency.
The law firm said the complex nature of ICOs and the lack of regulation means retail investors can be at risk of fraud if they do not seek advice before investing.
Partner at Pinsent Masons Alan Sheeley said: "Fraudsters are taking advantage of investors' need for income.
"Suppressed interest rates on mainstream savings products have driven retail investors towards higher yielding, more lightly regulated investments.
"Combined with the ease for companies of reaching the mass market through online advertising, this has added a new layer of risk for retail investors."
"The UK benefits from an open investment market but high incidences of reported fraud shows there are cracks in the structure."
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