Find out how rare earth metal investment schemes work, how to avoid scams and what to do if you are scammed.
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 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’t be certain what you are paying for.
How rare earth metals scams work
Investors are often called out of the blue, 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 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, and may lead to you making a substantial loss.
How to protect yourself
Most firms promoting and selling investments in rare earth metals are not authorised by the FCA.
You should only deal with financial services firms that are authorised by us, and check our Register to ensure they are.
While we don’t regulate the sale of rare earth metals or their markets, 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. You can also check our Warning List of firms to avoid.
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 (eg 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 a rare earth metals investment when it’s promoted or sold as a futures contract without our authorisation.
Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
You should seriously consider seeking financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam.
Read more about how to find an adviser.
If you have been scammed
Because rare earth metals are not regulated by the FCA, your investment is not protected by the UK’s Financial Services Complaints and Compensation Scheme.
However, if your investment was a futures contract, we can take action.
If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.
The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.
If you have any concerns at all about a potential scam, contact us immediately.