Spanish investment regulator warning (chiringuitos). The equivalent of the UK Scorpion Campaign. Clear and comprehensive. Translated for UK Expats in Spain.

1. SPANISH REGULATOR’S (CNMV) GUIDE
FINANCIAL CHIRINGUITOS (“IFA” FLY BOYS/SCAMMERS)
“CHIRINGUITOS”meansentitiesofferingandprovidingpensions/investmentandadvisoryserviceswithoutbeing
authorizedtodoso. Theyare dangerousbecause inmostcases the apparentprovisionof suchservicesisjustacoverfor
foolingvictimsintobelievingtheyare makingahighlyprofitable investment.Itisimportanttounderstandthathigh
yieldsofferedare oftentoogoodtobe true:the baitto con ill-informed(naïve) investorstohandovertheirsavingsor
pensions.Whenexposed,the “CHIRINGUITOS”simplydisappearorchange theirnames.Theyare simplyswindlers.
Companiesauthorizedtoprovide investmentservices(brokers,portfoliomanagers,IFAs,banksetc.) are subjecttothe
rulesgoverningthe securitiesmarketsandstrictcontrolsbythe supervisorybodies(CNMV andBankof Spain). Only
CNMV-registeredcompanies are authorizedtoprovide pension/investmentservices,afterdemonstratingcompliance
withspecificlegal requirementsandstandards.
CHIRINGUITOSare not attachedto the InvestmentGuarantee Fund,sothatinvestorsare notprotectedinthe eventof
insolvencyof the entity(authorizedentitiescontribute tothese protectionfundsthroughcompulsorysubscriptions).
There isno particulartype of victimbecause oftenscamsare veryelaborate. Victimscanbe small businesses,
individuals orprofessionals whofall forcredible-soundingfalsepromisesof quickwealthandeasygains.
In short,to trust a CHIRINGUITOis a sure way to lose capital,withnoinvestorprotectionunderthe laws.
How CHIRINGUITOSwork
The channelsusedbyscammersand boilerroomstocontact potential victimsare nodifferentfromthose thatcanbe
usedlegallyby legitimateentitiesi.e.telephone,letters,e-mail,webpagesetc. The difference liesinthe waythe
scammersuse these channels,the type of messagestheyconveyandthe general approachtoachievingtheirgoals.
The CHIRINGUITOS use databases(often obtainedfraudulently) of people who,forexample,have purchasedaparticular
financial product,publication - oron occasionanswered asurveyabouttheirtastes,interestsand financial situation.

2. Phone calls
Coldcallingisone of the CHIRINGUITOS’favourite contactmethods. Itallowsthemto directly exercise psychological
pressure techniques. Coldcallingisbydefinitionunexpectedbutislegal,andinfactauthorizedentitiesoftenuse itas
part of theirpromotional campaigns. However,inthe case of authorizedentities,itisnormal practice tocall existing
customers,sopeople knowtheirdatahasbeenobtainedlegitimately. If the answertowhatis beingofferedis“no”this
isacceptedpolitely.Bycontrast,the CHIRINGUITOSdonot usuallysettleforaNO.
Mail
High-qualityleafletswhichare sophisticated,invitingandpromising. These oftenrequestthe recipientstocontactthem
by fillingouta form,callingbyphone orby visitingtheirwebsite.
Internet,e-mail
The great success of the Internetasa directmarketingtool allowsadvertiserstoaccessa wide massof recipientsmore
cheaplythan traditional media(phone,mail).Thisfact,coupledwiththe possibilityof anonymity,hasledtoabuse of the
medium,suchasspam or indiscriminate emailingof unsolicitedproductsborderingonillegality. Recipientlistsare often
obtainedunlawfully,inbreachof dataprotection rules. Also, the addressof originof the messagesare usuallyfalse,and
alsothe subjectheadingsare deliberatelymisleading. Spanishlaw decreesthatcommercial communicationsshouldbe
identifiedassuchandprohibitssendingemailsunlesstheyhave previouslybeenrequestedorexpresslyauthorizedby
the recipient.Noseriouscompanywouldeverspamthe public,asthat wouldbe invadingconsumerprivacy.
Whenit comesto financial productsandservices,we mustbe verycautiousaboutoffersandinformationreceived,even
if theyhave beenrequestedorconsentedto.Financial fraudonthe Internetcanbe carriedout bymore sophisticated
means.Spamisjust one of the possiblemechanisms,because the Internetoffersvarioustoolstodisseminate potentially
fraudulentorquestionabledeals:boards,newsgroups,chats,orevensophisticatedwebpages.
Phishing
Anotherdangeris“phishing”:emailsthatappeartocome fromlegitimate financial institutions,whichrequestpersonal
passwords.These messagesoftenleadtoa website that imitatesanauthenticentity(althoughitmayhave spelling
mistakes),whichfoolspeople intoenteringtheirpersonal dataorpasswords.
Pharming
Evenmore sophisticatedis“pharming”:people whovisit fraudulently-clonedwebsitescanhave theirpersonal,
confidentialdatacollectedbycriminals. Neversurrenderpersonal orconfidential businessinformationtounknown
persons.If a requestforpersonal dataappearslegitimate,use anestablishedphone numbertodouble check.Also,don’t
access websitesvialinks,buttype inthe full URLand,if possible,install antiphishingand antipharmingtools.
Adverts
CHIRINGUITOSalsoadvertise innewspapers,magazinesorothermedia(suchastelevisionteletext) tooffer
opportunitieswhichare muchmore attractive thantraditional investmentsandpromisingtoprovide attractive
opportunities(which,of course,are notso inreality).

3. Personal referrals
It iscommon forpeople tomake theirinvestmentdecisionsbasedonrecommendationsfromacquaintancesorrelatives
whomtheytrust.Knowingthis,sometimesthe CHIRINGUITOSpaygreat benefitstothe firstcustomers,usingtheirown
moneyor fromotherinvestors;thisiswhatiscalleda Ponzi scheme.Infact,those investorswhounwittinglyactas bait
are onlygoingtoget limitedperformance atfirstandsuccessive investmentsbegin togeneratelosses.Then,the
companywill notrespondtorequestsforrepaymentof capital andfinallydisappearwithall the moneyinvested.
Personalizedinvestmentrecommendationsshouldalwaysbe made byaprofessional entityauthorizedtodoso,because
whatis goodfor one investormaynotbe foranother,dependingontheirdifferentpersonal andfinancial circumstances.
Persuasiontechniques
The listof boiler-roompersuasiontechniquescannotbe exhaustive,since the argumentsandmethods are increasingly
sophisticated.Therefore itisimportanttostayalertto any financial offerthatisnot froma known,registeredparty.
Accurate predictions
A simple butveryeffectivetechnique –usingalarge numberof callsto impresspotential victimswiththeirknowledgeof
financial markets - half of whichconfidentlypredictthe rise of acertaininvestmentvalueandthe otherhalf predicting
decrease of the same value.Inthe followingdaysthisexercise isrepeatedseveral time. Those targetswhowere givena
seriesof successful predictionsare contactedagain. Now convincedof the infallibilityof acompanythat has hitall its
forecastsforseveral consecutivedays,these people are willingtosurrendertheirsavingstothe CHIRINGUITOS.
Appearance of respectabilityand success
CHIRINGUITOSknowit isessential tolookrespectable andseemlike financialmarketexperts.Sotheydress smartlyand
eleganlyandrentluxuryoffices.Sometimesitisdifficulttogetan appointmenttomeetthembecause theywanttogive
the impressionof being busyand inhighdemand.
Incomprehensible explanationsanduse of technical jargon
CHIRINGUITOS promotingfraudulentinvestmentstalkwithconfidence andmasteryof technicalitiesthatmake them
looklike expertsonthe subject.Infact,the aimisthat the potential victimdoesnotunderstandanythingandchoosesto
trust those whoseemto be expertswho knowwhattheyare talkingabout.
Offeringlarge profits with little risk
CHIRINGUITOSpromise muchhigherreturnsthancan be obtainedfroma conventional investmentwithminimal risk. A
basicprinciple thatall investorsshouldbearinmindisthatprofitabilityandriskgotogetherinseparably.The possibility
of obtaininghighyieldsalwaysinvolvestakinghighrisks. Be waryof anyofferthatensureshighreturnswithoutrisk.
Insistence onan immediate decision
Urgency isa major factor,not onlybecause theywanttoget theirhandson yourmoneyasapand withthe leastpossible
effort,butbecause theyknowthatif the investorhastime tothinkproperlyaboutthe offer,orseeksprofessionaland
reliable advice, he willprobablyrejectthe offer. So,CHIRINGUITOSuse tricksaimedatachievinganimmediate decision
to try to convince the victimthattheyare offeringaunique opportunity thatwillexpire soon.Investorsshouldbe aware
that thisisnot true:there isalwaystime to assessthe characteristicsof a financial offerandtomake sure itis suitabl e.

4. Psychological pressure
The conversation,eitherbyphone orby anyothermeans,usuallybeginsinacordial fashion,butif the targetedvictim
showssome potential resistance the scammercanbecome more aggressive.Thisconstitutesafundamental difference
betweenthe CHIRINGUITOSandthe authorizedentities,who alwaysrespectaprospect'srightto notbe interested.
Althoughpsychological pressure cantake manyforms,here are some common tricks:
 Nottakingno for an answer
 Beingrepeatedly insistent
 Becomingincreasinglyaggressive
 Questioningthe intelligence orabilityof the investortomake a decision
 Conveyingthe ideatheyare doingthe victimabigfavorby offeringexceptional gains
 Making itclearit wouldbe absurdto question the promisesmade
 Usingwarningssuch as: “you’ll regretitif youdon’tgo ahead”or “you’ll nevergetrichif you ignore myadvice”
Whento be suspiciousof a financial offer
Most of the techniques usedby CHIRINGUITOS wouldnotbe usedby authorized firms,since theyare subjecttostrict
rulesof conduct.Authorized firmsare requiredtokeepcustomersproperlyinformedandtoprovide informationto
investorsfairlyandclearly.Inparticular,theymustprovideinformationabouttheirservicesandfinancial instruments,
so that the clientknowsthe nature andrisksof the investmentservice that itisgoingto provide andthe characteristics
and risksof financial instruments offered.
It istherefore importantto understand the difference betweenpeopleorentities whoare authorizedtoprovide
investmentservicesand those who onlyintendtocarryout a scam. Whenan authorized firmsellsaproduct,the
customermustrequestinformationontheirknowledgeandexperience inthisproduct,inordertoassess for himself
whetheritissuitable forhim.Thisiscalledasuitabilitytest.
Whena brokeris goingto provide investmentadvice ormanage aninvestmentportfolio,inadditiontoaskingaboutthe
client’s investmentknowledge andexperience, he should requestadditional information suchasthe financial situation
and investmentobjectivesof the client(riskprofile,time-frame etc.)–as properfinancial advice isalways personalized.
The boilerroom scammers’onlyaimisto attract moneyfromtheirvictims,so they donotcare about theirclients’
expertiseininvestmentsandfinancial circumstances –all theyneed toknow isthat theyare willingtoinvest.
The contact must have beenrequestedby the prospect
Authorised entities have toworkwithpersonal dataina legally-compliantmanner,and the clientmusthave giventhem
permissionto make commercial offers.Butif anentityof whichwe have neverheardcontactedusto offeran
investment,youhave totake extraprecautionsbecause thisisprobablya scam.
Authorizedentitiesneverpressurise customers
Anyinvestmentshouldbe approachedwithsufficientknowledge of the characteristicsandrisksof the product. It is
importantto dothoroughresearch before committing.The investorneedstime todecideandgetanswerstoall their
questions.However, scammers pressure the victimtogetan immediate yes,withoutgivingthemachance to reflect.

5. How to protect yourselfagainst a possible CHIRINGUITO
Promisesof exceptionalreturnswithoutriskshouldmake ussuspiciousimmediately. Nevertrustanunknown entity
until theyhave beenable toverifythat theyare properly authorizedtoprovide investmentservices. The investorhas
available the followingprotectionmechanismswhichshould alwaysbe usedbefore handingovercapital:
a. Requestinformationfrom the supervisory body,inthiscase the CNMV
b. Identify any peculiarities aboutthe investmentproposal
c. Demandconcrete answers andmake sure theyare fullyunderstood
Ask for informationfrom the CNMV
The InvestorAssistance Office of the CNMV isat your disposal toinformyou whetherentities are authorised toprovide
investmentservicesornot.If you have beenadvisedto deal withacompanythat has beenreferred/recommended,you
shouldcall the CNMV for assurance that itis an entity whichis authorized,registeredandsupervised.Publicrecords are
alsoavailable throughthe website of the CNMV (www.cnmv.es). Investors canalsovisitthe websiteof the International
Organizationof SecuritiesCommissionsIOSCO, (www.iosco.org)where thereare warningsandadvice available.
The CNMV regularlyissues warnings aboutentitieswhichare suspectedof providinginvestmentserviceswithout
authorization.These warnings maycome fromthe CNMV (when itisaware of the existence of possibleCHIRINGUITOS
throughinquiriesorcomplaintsfrominvestors) or whichhave beensuppliedbyaforeignregulator(bearinmindthat
CHIRINGUITOS may operate theirfraudulentactivitiesinmore thanone country).
To make it easierforinvestorstoidentifyentitiesoperatingwithoutauthorization,the website of the CNMV provides a
searchengine thatcan locate themquicklyand easily.Entitiesthathave notbeen placedonthe warninglistmaynotyet
have beendetectedbythe supervisorybodies.Itisimportanttorememberthatalthoughmostof the victimsof fraud
contact the CNMV afterlosingtheirmoney,itisalwayspreferableandmuchlessexpensive toconductthisconsultation
inadvance,i.e.before handing anyfundsover.
Identifythe characteristics of the proposal
Sometimes,the activitiesof the CHIRINGUITOS are maskedunderthe guise of consulting services,inwhichinthe client
ischarged a high commissionontheirinvestment(whichalsooftenaddstothe total lossof the capital).However,all
entitiesmakingpersonalizedinvestmentadvice mustbe registeredonapublicregistry,sothat potential victimscan see
whetherornot a firmor person isauthorizedtoprovide thisservice.
Generally,CHIRINGUITOS require fundstobe transferredtoacurrent account(sometimesabroad) onbehalf of anon-
Spanishcompany.Ingeneral, anyoffshore entitiesare notauthorisedorregulated. The investmentstendtobe complex
financial productsin unknown foreignmarkets.
There are oftenentitiesorwebsitesthatofferinvestorsthe opportunitytoinvestinforeignexchange derivative
products(CFD,futures,rollingspotcontractsetc.). The forex market(foreignexchange) isverycomplex,soanyaccess
to thisshould only be done byauthorizedentities.
Scammersare often reluctanttoprovide updatedinformation orrespondtoquestionsfromthe investor, althoughthey
promise thattheyare offeringarelationshipbasedonmutual trust. Butrememberthattrust issomethingthatmustbe
earned,the more sowhenit comestogivingyourmoneyto organizationsorpersonswhohave failedtoestablish their
legality,professionalintegrityorsolvency.

6. Insistthatany adviserprovidesclearanswers toquestions. The investornotonly hasthe right butalso the duty to know
inadvance all relevantaspectsof the proposedinvestment.One of the maindifferencesbetweenauthorizedfinancial
institutionsand CHIRINGUITOS isthat the formerinvite investorsto askquestionsand thenprovideall necessary
answersand information,while the scammers trytomake theirtargets feel ignorant, andtotrustthemblindly.
Beloware some questionstoaskthe advisers tosee whethertheyare CHIRINGUITOS.Infact,many of these questions,
particularlythose relatingtothe characteristicsandrisksof the investmentshouldalsobe made whendealingwith
authorizedentities.The difference isthat scammerswill be unwillingtoprovide clearanswers:
1. How didyouget myname and contact details?
2. Why are you makingcontact withme?
3. Is yourfirmregisteredwiththe CNMV andthe Bank of Spain?
4. Is yourfirmsupervisedbyanypublicauthority?
5. Are you a memberof anyinvestmentprotection/guarantee scheme?
6. How longhave youbeenwiththe firm?
7. What isyour professionalexperience?
8. Is there anyfinancial entitywhichcangive youor your firma reference?
9. Doesthe investmentyouare proposingmatchmyobjectivesandisitsuitable forme?
10. What are the risksof thisinvestment? How muchcouldI lose andunderwhatcircumstances?
11. How wouldIprofitfromthisinvestment?
12. What has to happenforthe value of thisinvestmenttoincrease?(i.e.interestrate orstock marketrises?)
13. For howlongdo I needtokeepthe investment?
14. What isthe liquidityof the investmenti.e.how andunderwhatconditionscanIget mycapital back if I needit?
15. What commissionsare payable? Howare theycalculated? CanI have a copy of the fees/rates?
16. Can I have a copy of the documents/contractsthatIhave to sign(toread carefullybefore signingthem)?
17. Is there anyofficial documentregardingthe investmentatthe CNMV regulator? Can I see it?
18. Can yougive me a writtendetailedexplanation of the investmenttoread/digestcarefully andasecondopinion?
19. Can we discussthe proposedinvestmentwithmylawyerorwitha trustedfinancial expert?
20. If anythinggoeswrongwithmy investment,whatavenuesof redressorcompensationdoIhave?
Just askingthese questionsis notenough. CHIRINGUITOSare expert at beingpersuasiveand evadinganswering
questionswithplausibleexcuses. Thisis why it is essential to check out any person,firm or investmentwith the CNMV
before handingover anyfunds.