High yield investment plans (HYIP’s) are investment vehicles that purport to yield very high percentage returns on investment within a short period of time. There is also considerable publicity on HYIP’s as being very high risk and/or fraudulent. This article will discuss how an HYIP works in terms of 1) its financial performance and 2) its legitimacy as a financial entity and/or product.
FINANCIAL PERFORMANCE OF HYIP’S:
A sample list of HYIP’s can be found at www.hyip.com. Information about these HYIP’s can be found through HYIP “monitor sites” such as hyip.com. HYIP’s offer daily compounded interest at rates between 1-5% , however several of them offer rates in excess of 30% and as high as 140% daily. HYIP’s require a cash deposit to open an account, often with varying minimum and maximum deposit requirements. HYIP’s collect investor’s capital and manage it through a number of techniques that may or may not be disclosed to the investor. Many HYIP’s operate out of offshore legal jurisdictions such as Anguilla and Sachelles. Invested funds are not necessarily insured nor are investment returns and interest rates necessarily guaranteed.
VERIFICATION OF HYIP LEGITIMACY:
Verification of HYIP legitimacy is important to knowing how a HYIP works; after all if the HYIP doesn’t work correctly, then it might not work at all. To verify the legitimacy of an HYIP performing the following checks will indicate the national laws for which the investment plan operates, credibility as an investment program and physical location and licensure of the business.The following link may also be helpful in identifying and determinng legitimacy of an HYIP.
* Internet domain and physical address within your own country
* Full disclosure of the investmetn product and profile
* Business profile information on the nature of investments
* Registration and/or licensure with a reputable domestic department, commission, or institution such as the Securities and Exchange Commission (SEC)
* Historical performance of the HYIP and its documented quantitative statistics
* Accurate details of how and why the plan works
If the HYIP is not able to provide adequate information on the majority of the above points there is good chance money invested in HYIP may not be a secure or viable investment. Contacting the SEC to inquire about companies that raise large amounts of investment capital may be a prudent part of good due diligence prior to investing.
The reason registration with the U.S. Securities and Exchange Commission is a helpful indicator of the viability of the investment product is the required compliance with the regulations set out by the commission. High Yield Investment plans may be similar to Hedge funds in the sense they don’t always have to register with the Securities and Exchange Commission if they are 1) business partnerships with a limited amount of investors, 2) Have raised equity below a certain dollar amount and 3) don’t operate within U.S. legal jurisdiction.
SUMMARY:
High yield investment plans offer daily interest compounding that amount to high yield returns on investment capital. HYIP’s operate online via website portals and often require wire transfers of money to open an account. Many HYIP’s are not U.S. companies subject to the laws and requirements set forth by domestic regulatory bodies and therefore may not be required to insure, guarantee, report or function in a way that might be expected. HYIP’s are considered by many market observers to be fraudulent capital raising schemes that benefit the initiators and managers of the HYIP only. A high level of due diligence may prove beneficial before investing funds into an HYIP.
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Sources:
http://www.incomeinvesthome.com/info/hyip/legal.htm
http://www.pueblo.gsa.gov/cic_text/money/internet-fraud/internet-fraud.htm
http://www.mirroreyes.com/smallbiz/makemoney/hyip.html
http://www.marketwatch.com/news/story/high-yield-investment-schemes-only-lay/story.aspx?guid=%7B920F6354-6A12-4346-B09C-01280399264F%7D
http://www.aicpa.org/audcommctr/guidance_resources/regs_and_fncl_reprtng/other_regs/49.htm