Rare earth metal investment schemes

Find out why we are concerned about the offer and sale of investments in rare earth metals, how the investments and schemes work and what you can do to protect yourself.

An increasing number of people are being approached by firms promoting investments in rare earth metals and related schemes.

Rare earth metals are chemical elements used in the manufacture of products like computers, mobile phones, batteries, satellites and wind turbines. They may also be called ‘rare earth elements’.

Despite being called ’rare‘, these metals are some of the most abundant resources – their name comes from the difficulty in extracting them from the earth.

Rare earth metals: Why we are concerned

We are yet to see any convincing evidence that there is a viable market for retail investors to make money from investments in rare earth metals.

Manufacturing companies that use the metals almost always buy them in very large quantities, making it highly unlikely they will deal with small independent retail consumers.

It has been reported to us that callers promoting investments in rare earth metals are using dubious, high-pressure sales tactics and targeting vulnerable consumers.

We believe the firms promoting investments in rare earth metals have previously been involved in selling other high risk and unregulated products such as carbon credits, fine wines, land without planning permission and overseas land and crops.

There is a strong possibility of fraud with each of these products, including rare earth metals, because they are unregulated and it is difficult to confirm that the product or scheme exists, especially when it is said to be based abroad. It seems unscrupulous brokers attempt to take advantage of this uncertainty to get people to invest.

How rare earth metals are sold

Investors are often called out of the blue by salespeople promoting rare earth metals, but contact can also come by email, post, word of mouth or at a seminar or exhibition.

The caller may claim rare earth metals are ‘the new big thing‘ in alternative investments and insist that high demand for the metals in the manufacture of many goods will lead to very attractive returns.

You may be told the supply of rare earth metals is falling, especially in China where most of the production takes place, and that prices are set to soar as international demand grows.

It is difficult to find and track prices of rare earth metals as they are sold on private markets rather than traded on an exchange, like precious metals such as gold and silver.

This makes it very hard to check if you are paying the right price for an investment in rare earth metals, to eventually sell it at all or at least at a competitive rate, and may lead to you making a substantial loss.

The projects involved in extracting rare earth metals will almost always be based overseas, which means UK authorities can not monitor the quality of the products or verify that they exist.

Rare earth metals are generally not sold in their pure form, but will be distributed in varying mixtures of purity. This means quality and quantity always vary and you can not be certain about what you are paying for.

Protect yourself

Remember: if it sounds too good to be true, it probably is!

Most firms promoting and selling investments in rare earth metals are not authorised by us. We strongly advise you to only deal with financial services firms that are authorised by us, and check our Register to ensure they are.

If you buy an investment product from a firm that is not authorised by us, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

This also means you will not be able to take your case to the FOS or FSCS if you cannot sell or trade your investment in rare earth metals.

You should also search our list of unauthorised firms to avoid doing business with, although the names of the firms are likely to change regularly.

We do not regulate the sale of rare earth metals or their markets. But we do regulate certain types of exchange contracts (often called ‘futures’), and a firm must be authorised by us to promote or sell them in the UK – check our Register to make sure the firm is authorised.

The sale of rare earth metals may be part of a futures contract if you buy it for investment rather than commercial purposes and the physical asset is not delivered to you within seven days of agreeing to the purchase. For example, it may be a futures contract if you agree to buy the metals wholly to make money when you sell them, but the metals have not even been mined.

We can only take action over an investment in rare earth metals when it is being promoted or sold as a futures contract, without our authorisation.

There are more steps you can take to keep your savings safe – find out how to protect yourself from investment scams.

You can also find out about reporting a scam.