Say you are offered investments that look like regular mutual fund investments.

You ask how much money is invested.

The sales people say, all funds are invested.

You read the contract and found nothing suspicious.

Turns out, you overlooked a verse in the 20 page contract that states that 50-70% of the money goes to pay the agent commission; only partially % is invested. The very important term is well hidden within those 20 pages.

You confront the sales people and they say that all of the money is invested. If you let the investment grow, in 1000 years you'll get your money back if the market is good. So the whole thing is "long term investment".

Is this fraud?

What does the law says in say Indonesia, USA, or anything?

NB: If it's a fraud, is this a crime or still just purely civil matter?

Update: In Indonesia many insurance companies charge high acquisition costs. So 100% of premi is gone to pay for the acquisition costs. Actually the total amount gone is about 230% of yearly premi.

Things get interesting because in some companies, even when the insurance benefit only worth $10, an agent can set premi to be very high (thousands of dollars or even more) and claim that all money are "invested".

So basically customers put $5k on "investment". Agent says "all are invested." Customer thinking that all are invested put huge money only to see all those money are gone for fees.

Customers got

  1. Nothing. All money are gone for acquisition fee. About 50% is to pay insurance agent.
  2. Insurance protection worth $10.
  3. An option to "continue" the "investment" where customers will lost even more money for insignificant insurance cost.

Basically customer miss the part where it says that 100% of premiums are gone for acquisition fees. It's written in contract but quite well hidden among terms that's not important due to low insurance portion of the arrangement (like how to file a claim).

Note: If you said that this is fraud in your own jurisdiction, please tell what exact laws/court case a person can use to sue the agent or companies. In Indonesia, for example, there is law that customer have right to get information that is honest, clear, and correct. However, the company can says that the information is there in the middle of the contract that the customer have agreed. The company can also says that they have paid agent to "explain" the contract to customers and if anything goes wrong, it's "agent's" fault.

Basically this question relates to When a contract is being analyzed in court, is it the understanding of the parties or the written contract that is to be established?

Basically the customer miss some important term of the contract. However, the contract is written in such a way that most people would miss those terms.

  • This is not the actual story. The actual story is unit link insurance. 100% of the money (not 99%) is gone but agents often say all are invested because "part" of the money on 2nd-5th years are indeed invested. The customer found out what's wrong and terminate the term. However, he lost his whole 1st year money invested.
    – user4951
    Commented Jun 16, 2016 at 3:26

3 Answers 3


It might or it might not be fraud. The outcome will depend on how the facts and evidence are interpreted at trial.

A more general version of this question is:

If two parties discuss and orally agree to X; then sign a contract that states they agree to Y, what are the parties bound to? X? Y? Or something else?

In your version, X is a fraudulent statement. And Y is an obfuscated writing.

One party will argue fraud. The other will argue not fraud on the basis that all the facts were disclosed in writing. The party alleging fraud will carry the burden of proof. The standard of proof will be preponderance of evidence (more than 50%).

Generally speaking, written evidence outweighs oral evidence if not accompanied by substantiating facts. Substantiating facts could be:

  • emails or
  • other written correspondence,
  • a prior history or pattern of making false claims to others regarding this investment,
  • the respective behavior of the parties after the agreement was made
  • or anything else that corroborates the oral testimony presented at trial.
  • If it's a fraud, is this a crime or still just purely civil matter?
    – user4951
    Commented Jun 16, 2016 at 3:26
  • And the main purpose of the customer is not to get his money back but to warn other customers from having the same fate. This run afoul of anti defamation laws that seems to
    – user4951
    Commented Jun 16, 2016 at 3:43
  • Securities fraud is a both a crime and a civil tort. Commented Jun 16, 2016 at 4:37
  • In your juridiction, which law actually said that this is fraud?
    – user4951
    Commented Jun 18, 2016 at 2:20

IANAL but in the UK (and I suspect the whole of the EC) I think this would fall foul of laws against unfair contract terms.

From the Financial Conduct Authority website

The Consumer Rights Act 2015 and the Unfair Terms in Consumer Contracts Regulations 1999

The UTCCRs protect consumers against unfair terms in standard contracts between firms and consumers. They implement the Unfair Terms in Consumer Contracts Directive (93/13/EC) and apply to contracts entered into from 1 July 1995 to 30 September 2015.

On 1 October 2015, the UTCCRs were revoked and replaced by the CRA. The CRA applies to consumer contracts entered into on or after this date.

The unfair terms provisions of the CRA protect consumers against unfair terms in contracts and notices, including terms that have been individually negotiated.

The above applies to general consumer contracts, but the FCA also has powers for specificaly financial services:

Additional powers to take action

In parallel with our powers under the CRA and UTCCRs, we have powers under the Financial Services and Markets Act 2000 (FSMA). If we can achieve the same level of consumer protection, we may act under FSMA instead of under the CRA or UTCCRs.


It is fraud in my Jurisdiction,and, I suspect many others. I guess it depends somewhat on if you can prove you asked the question, and how much weight your jurisdiction provides to consumer law.

I'd imagine you would be hard pressed to file a criminal case (unless you could get the sales-person to roll on there employer and prove they were told to lie), but you would have a strong civil case in NZ as it goes against consumer protection laws.

  • The company didn't come to pre court. Customer consider going to real court. Many lawyers in Indonesia has advised that the company has the upper hand because it's written in contract no matter how hidden it is.
    – user4951
    Commented Jun 17, 2016 at 0:49

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