In the latest edition of its consumer information series “Let’s talk about money” the Austrian Financial Market Authority (FMA) informs about the topic of structured sales, and warns consumers about becoming the victims of rip-off scams.
Structured sales, also known as network marketing or multi-level marketing (MLM) is a form of direct selling in which the customers attract further customers as self-employed sales partners. Typical characteristics for structured sales in a near-financial area are high initial investments, the prospect of being able to earn a lot of money, as well as being ordered to also sell the products to friends and acquaintances. In such models there is an extremely fine line being serious businesses and fraud – interested parties should therefore make sure to scrutinise whether the product that is being marketed is actually valuable in its own right.
Warning signs for models that are not serious include, for example, large events and parties in top locations, the emphasis on community spirit, and the system being portrayed as a new movement and payment schemes in which travel, cars etc. are offered. The selling of webinars and trading signals instead of real products is another alarm signal.
The FMA is only able to act, where the products being sold are financial instruments or where investment advice takes place, without the required licence being held. In most of the models that the FMA is aware of, they are not services that require a licence – nevertheless the FMA would like to draw attention that the utmost caution is necessary and therefore warns consumers against becoming the victims of fraudsters.
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