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Expat Investor : October 2007
4 EXPAT INVESTOR October 2007 • Up to 6.50% gross p.a./AER* • For personal and professional investors. • Customers can hold multiple issues up to £5m. • Easy access for 14 days at maturity. • Minimum investment £50,000. • Personal, friendly service. Scarborough Channel Islands Limited is a subsidiary of Scarborough Building Society, a top-20 UK building society, so you can be confident that your money is in safe hands. HIGHLY RATED † really highly rated! † Rates correct at time of going to press. The headline rate shown is for an annual interest paying account. All investments must be received while the current issue is open. This product has limited availability and can be withdrawn at any time without notice. *The 'gross' rate is the contractual rate of interest payable before the deduction of income tax at the rate specified by law. AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Scarborough Channel Islands Limited (SCIL) Registered office: Suite 5 North, Town Mills, Rue du Pre, St Peter Port, Guernsey, Channel Islands, GY1 3TR. Licensed under the Banking Supervision (Bailiwick of Guernsey) Law 1994 as amended. Copies of the most recent audited accounts are available from the above address. Registered in Guernsey No. 25871. SCIL is a wholly owned subsidiary of Scarborough Building Society. Deposits with SCIL are not covered by the Financial Services Compensation Scheme established under the UK Financial Services and Markets Act 2000. Scarborough Building Society has given an undertaking agreeing to discharge the liabilities of SCIL in so far as SCIL is unable to discharge them out of its own assets and whilst SCIL remains part of the Scarborough Building Society Group. THE NEW 6 MONTH ROLLOVER BOND Now here is a funny thing! Investors are being contacted by an international group of companies and invited to put their savings into gold, silver, and base metals. The business itself boasts 'an international network of commodity investment professionals'. And it has offices in the US, Britain, Spain and Dubai. Yet this investment group is not licensed by any watchdog body such as the Commodity Futures Trading Commission in Washington DC or the Financial Services Authority (FSA) in London. There are no regulations governing it. And there is no compensation scheme to rescue investors if things go badly wrong. And all this is perfectly legal. With investor protection laws having been operating in most modern countries for decades -- and in the US since the 1930s -- how is this possible? Well, the business in question is the Capital Asset group of companies, and it certainly talks the talk of the investment world, but when it walks the walk, it falls down. Its website at www.capitalasset.com says: "Our program is similar to the futures markets in that you can create powerful investment leverage; but unlike the futures markets that have the risk potential to develop negative equity in your account, our non- recourse loan feature limits your risk to your equity deposit." This certainly sounds attractive, but here is what it really means. Wo rking through agents in various countries, customers wind up dealing with Capital Asset Trading of California and Capital Asset Financial Services of Delaware. And what the agency salesmen sell as an investment is actually a physical lump of gold, silver, copper or whatever. In theory, investors could go to a warehouse in the US and drive off with their metal. In practice of course, they just get a receipt -- exactly as they would if they were dealing in commodity futures. The difference is that trading in physical lumps of metal is not regulated. This does, of course, sound safer than futures trading, so where is the risk? Well, Capital Asset has a neat system of money lending to boost its profits. If the salesman persuades you to invest, say, $20,000, he will move on to pitch the company's 'powerful investment leverage' scheme that means you can actually control metals worth $100,000. In short, the Delaware arm of the group lends you $80,000, though the talk of 'leveraged positions' is so well done that some investors have not even realised that they were taking on a massive loan. What happens next is that the investor faces interest charges on the $80,000. And unless the metal he has bought happens to appreciate in value at a higher rate, he quickly finds he is losing money. His choices, then, are to put up even more cash to cover the interest charges and stay in the game, or to call it a day. If he calls it a day, Capital Asset will repossess his metal, at a price it sets, collect whatever interest is owed, and then give the investor what's left. The company cannot lose, because it fixes the prices for both selling and buying back the metal, and it decides its interest rate. The punter could win if physical metal prices rise extraordinarily sharply, ahead of interest rates, but losses are far more likely than gains. And this is how it is possible to structure an investment deal that sounds just like commodity trading, but isn't. Legally, the people behind Capital Asset are nothing more than scrap metal dealers in sharp suits. Readers are invited to contact Tony Hetherington via the editor at email@example.com All that glisters is decidedly not worth it Financial investigator Tony Hetherington exposes an under-regulated area of investment currently enticing expats to take on heavy loans. Savings reunited Ever wondered what happened to the money in that school savings account you had in primary school, or found an old bank book when you were moving house? Well, no need to wonder any longer. The British Bankers' Association (BBA) has launched a major drive to reunite people with money in dormant accounts. The Association already runs a free service which aims to match people to their cash, which is easily accessible from their website www.bba.org.uk. So far 40,000 people have used the BBA's matching service to submit a claim. It has fielded twice that many telephone enquiries and the dormant accounts pages on the BBA website attracted 149,000 hits last year alone. Chief Executive Angela Knight said she hoped the campaign would highlight the fact that, even if an account is old, the sums involved small and the branch or bank closed, people could still get their money back. Ms Knight tells Expat Investor, "The British Bankers' Association runs a free money match service which helps people reclaim money that is sitting around in dormant accounts up and down the country. So if you find an old bank book when you are moving house -- get in touch. Don't worry if the amounts are small or even if you find the bank has merged or the branch moved. Our experts here will help you get your money back." The BBA's money match service said the top reasons for dormant account claims included the following situations, moving house and forgetting to tell the bank, finding old bank books when someone goes into care or dies, and thinking the sums involved were too small to worry about.