Being the legendary detective Sherlock Holmes, who solved the most complex mysteries of London's streets, was undoubtedly the dream of many British kids, who are now active individual investors. A recent survey by the Financial Conduct Authority (FCA) shows that one in four consumers who have avoided investment fraud in recent years did not give up on their childhood dreams and drew inspiration from the Holmes character to spot and report scammers.

Sherlock Holmes-Like Investors Spots Investment Crime

According to FCA's statement published on Tuesday, the data gathered from the regulator's helpline showed a 193% increase in scam reporting calls in the last five years, as retail investors are getting better at identifying and detecting potential investment scam red flags. Due to their commitment and timely notification, over £2 million of possible losses were foiled.

The newest research shows that 39% of respondents rely on their Sherlock Holmes-like investigative or research skills to identify clues. In comparison, 32% trust their intuition to differentiate between legitimate investment opportunities and potential scams.

These 'detective' investors identified mistakes (34%) and requests for personal information (34%) as the most common red flags for investment scams, along with unsolicited contact (33%) and high-pressure sales tactics (26%).

"Scammers are becoming more and more sophisticated, coming up with different tactics, such as impersonation texts or calls, and using the cost of living pressure as a way to tempt investors into false opportunities. Once money has been lost in this way, it's difficult to get back, so if something seems too good to be true, it probably is. It's great to see so many investors being able to spot the signs of a scam, and helping others to do the same," Mark Steward, the Executive Director of Enforcement and Market Oversight at the FCA, commented.

"You don't need to be a Sherlock Holmes to spot scams," Steward added.

Of the 1,036 investors surveyed by the FCA who avoided scams, 33% received the offer via email and 25% through a personal phone call. Once they realized the offer was a scam, 42% warned their family and friends, while 27% shared their experience on social media to alert others.

In April, the FCA unveiled a new three-year strategy to enhance outcomes for markets and retail investors. The strategy centers on three main objectives: mitigating and averting severe harm, establishing and assessing benchmarks, and encouraging competition and favorable transformation within the industry.

Watch the recent FMLS22 panel titled: "Regulation Roundup: Everything You Need to Know for 2023."

FCA Fights Scammers and Rogue Financial Ads

In the age of the Internet and social media ubiquity, the FCA's role is no longer limited to blocking the services of rogue investment market actors but also to identifying advertisements of their fraudulent offerings.

In February, the regulator announced that it had rejected 8,582 financial promotions in 2022, leading to the complete removal or alteration of their messages. It is a considerable jump of 1,400% compared to the 573 promotions rebuffed in 2021. At the same time, the FCA issued 1,800 warnings against scammers to protect British and foreign consumers.

The growing number of notifications requires the regulator to commit more resources. As a result, the FCA hired an additional 1,000 officers in 2022 to better protect consumers and respond more quickly to their calls.

A separate report by the Cypriot regulator CySEC noted that finfluencers, or financial influencers, are becoming a growing problem amid the popularity of social media in investing. They are becoming an authority for many individual traders. According to a January CySEC survey, more than 30% of retail investors base their decisions on the opinions of finfluencers.