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Wine Investment Warning: Extreme Caution Needed

Cases of wine stored at the Société des Bains de Mer in Monaco
© AFP | Cases of wine stored at the Société des Bains de Mer in Monaco
Wine investment companies may offer high returns, but they also carry high risks.

Alternative financial investments, including wine, are under scrutiny by the French securities regulator, which has warned the public to practice “extreme vigilance” when it comes to putting their money in wine, art or jewels.

Due to the current low interest rates, savers are looking to invest in products other than traditional assets, explained the regulator, the Autorité des Marchés Financiers (AMF).

“The AMF has observed the development of offerings from companies who propose investments with apparently attractive returns in sectors as diverse as letters and manuscripts, works of art, solar panels, stamps, wine, diamonds or other niche markets,” it said in a statement.

However, most alternative investments are not covered by the regulator, and investors are not protected when things go wrong. “As a result, the AMF advises investors to apply strict vigilance rules before making any such investment.”

The warning comes just weeks after a London-based wine investment business, Vinance, collapsed. The administrators told the BBC that they were “hopeful that investors will ultimately be repaid about half of their debt.”

Vinance is the latest in a series of wine investment companies to fail. Some have gone out of business due to poor management; others knowingly scammed investors and a number of company directors have since been imprisoned.

In an effort to prevent the public from becoming victims of failed wine investment schemes like Vinance, a regulatory body was launched in Britain at the end of November.

Established by members of the U.K. wine industry, the Wine Investment Association aims to safeguard the public “against fraud, malpractice and misrepresentation,” and to “encourage high ethical standards.”

The body is self regulating rather than being overseen by the Financial Services Authority (FSA), which regulates most financial services across Britain. Already, it has attracted criticism for allowing members to cold call potential clients, which runs counter to FSA rules. However, each member will be independently audited, and establishing the association is a step towards professionalizing the wine investment industry

The French securities regulator reminds the public to remember that "there is no such thing as a high return without a high risk," and warns: "Don't invest in something you don't understand perfectly."

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