Australia’s legal requirements support a whole system to protect you from fraud and dishonesty. While no system gives total protection, investing in Australia and in other countries that share similar legal requirements is far safer than in countries without these laws. Worldwide, investors recognise this fact by accepting lower returns on their money from well regulated countries compared with poorly regulated ones.

Under Australian law:

• Every business that gives investment advice must hold a licence.
• Every company that issues shares to the public must be a public company (with Ltd after its name, not Pty Ltd which is used by small private companies). It must produce audited financial statements, issue a prospectus and lodge a copy with ASIC, and keep investors up to date at all times on matters that may affect the price of its shares.

The majority of scams and swindles fail to meet these basic legal requirements. Criminals usually cannot be bothered going to the trouble and expense of setting their schemes up to resemble legitimate businesses. If an investment falls short of legal requirements, that’s a clear message to keep your wallet firmly closed.

Legal requirements may sometimes sound bureaucratic, but good laws and effective regulation strengthen our economy. Companies benefit because their cost of capital is lower, and the community benefits because it is cheaper to create jobs and support economic growth.

Always use licensed advisers, and invest only in investments that meet all legal requirements.

Why waste time and money assessing investment proposals that fail basic legal requirements? Only if it’s legal should you or your licensed adviser judge its merits and decide if it really suits you.