UK regulator warns on graphene ‘investment’ schemes

December 29, 2013 6:52 pm

UK regulator warns on graphene ‘investment’ schemes

By Jonathan Eley

Financial regulators in the UK have warned that consumers are increasingly being targeted by “dubious” companies offering investment opportunities in graphene, the carbon-based wonder material with a vast range of potential applications.The Financial Conduct Authority will on Monday post new warnings on its websiterelating to “unscrupulous brokers” who “appear to be taking advantage of the hype surrounding graphene and are using uncertainty about its future as a way to entice consumers to invest”.

It decided to take action after finding details relating to a graphene investment company on the computer servers of a suspected UK ‘boiler room’ operation that it investigated.

Graphene, discovered in 2004 by Andre Geim and Konstantin Novoselov at the University of Manchester, consists of endless two-dimensional sheets of carbon atoms. This structure gives graphene remarkable mechanical and electronic properties that are being developed for use in products such as display screens, electrical circuits, solar cells and batteries.

Although governments and companies are pouring billions of dollars into graphene research and development it is unlikely to be used commercially on a significant scale until around 2020.

“The scam we are highlighting relies on the fact that although many people will have heard of graphene, they may be unaware it will be some time before graphene-based products hit the market,” said Tracey McDermott, director of enforcement and financial crime at the FCA. “Finding an accurate price for graphene is very difficult, and its value is expected to fall over the coming years.”

Unlike shares and funds, graphene is not a regulated product and companies promoting it as an investment do not have to be authorised by the FCA. Consumers who deal with unauthorised companies do not have access to the Financial Ombudsman Service, which resolves disputes between financial services companies and consumers, nor are they covered by the Financial Services Compensation Scheme, which provides some security for investors against companies that fail.

The FCA said it suspects the companies or individuals promoting investments in graphene have previously been involved in selling other unregulated products such as carbon credits, rare earth metals and overseas land and crops, in which investors have lost considerable sums. It added there is a danger that what is being sold as graphene might actually be something else, such as carbon solutions, graphite or carbon nanotubes.

“The unscrupulous individuals behind scams are always on the lookout for new ways to part people from their money. They’re inventive and they’ll create investment schemes based on what is being talked about in the media,” Ms McDermott added.