Investment fraud is one of the "the most damaging" aspects of financial crime, which "has reached epidemic proportions" with a growing number of investors scammed out of their savings, according to chair of the Financial Conduct Authority (FCA) Charles Randell.
The FCA has been the target of much criticism for its handling of a spate of high profile scams and inappropriately risky investment scandals, such as that of London & Capital, but Randell said the regulator is now taking further action on investment fraud.
Reports of investment scams have skyrocketed in recent years, driven primarily by pensions freedoms and the growth of online advertisements for "get-rich-quick" schemes.
Fraud is a devastating crime which has reached epidemic proportions"
While the figure is uncertain, the Crime Survey for England and Wales puts the total volume of fraud affecting individuals at 3.8 million cases, around one third of the total volume of 11.2 million crimes.
The problem is likely worse than that figure suggests, according to the Office for National Statistics (ONS), as fraud is significantly under-reported and under-recorded with fewer than one in six incidents reported to either the police or Action Fraud.
In efforts to improve the regulator's record on fraud, Randell claimed the FCA can now move to ban "highly misleading" phrases like "secured" or "asset-backed" because "the so-called security or asset-backing can be worthless".
In a speech at the Cambridge Economic Crime Symposium Randell said a "well-functioning financial promotions regime" would "label a high-risk unquoted and unregulated investment as exactly that".
However, he said that unless the issue or approval of financial promotions becomes a regulated activity, whereby qualified and governed authorised firms were permitted to do it, "with clear standards" and supervision, it would not provide better protection than it does at present.
Randell added: "We know that many people's best investment strategy is likely to be paying down debt and, if there is money left over, investing for the long term in a low-cost, well diversified portfolio of high quality liquid assets.
"But too many people are currently pressured into investing in illiquid high cost and high risk investments.
"So we need to ensure that regulation guides them to better savings choices, through policies such as investment pathways, and perhaps by further reducing the 'bewildering array of products' that can be presented to them."
He also outlined the FCA's evolving approach to tackling fraud in three parts; focusing on "the firms we authorise and in particular on their regulated activities" and taking enforcement action "in cases of serious misconduct"; alerting consumers to risks of scams; and taking action "to shut down unauthorised investment business when we can".
Randell said: "Fraud is a devastating crime which has reached epidemic proportions.
"The FCA is committed to making all the changes necessary so that it can be as good as it can be in contributing to the fight against the scammers.
"And we continue to work on improving transparency and consumer understanding of risks and the impact of costs, to drive down the harm caused by the skimmers."
This article was first published by InvestmentWeek, a sister title to International Investment.