As news that insurance company Aviva may have been the victim of a cruel hoax, designed to give inside investors a massive windfall, it seems that the climate of uncertainty is continuing in the financial sector.

Aviva is one of the UKs largest insurers and what appeared to be an internal memo from the company’s Finance Director Philip Scott to Chief Executive Andrew Moss cast serious doubt on the company’s financial health.  The fake memo was released to one of the tabloid newspapers from a “whistle-blower” from within the company, who was supposedly looking to expose a possible liquidity problem.

After becoming aware of the scam the company alerted the Financial Services Authority who have taken up the investigation, and it was quickly confirmed that there was no truth at all in the fake memo.  This is a classic “bear raid”, which allows a group of investors to sell shares prior to bad news being announced, and then buy them back lower down – crystallising a potential massive profit for themselves.

While “short selling” – selling shares you do not own, with the intention of buying them back at a cheaper price – is not illegal, the circulation of false rumours and untruths is a serious offence which is covered by a whole host of financial regulations.  If the people involved in this scam are found then they risk serious criminal charges and possible prison sentences. 

This episode shows how uncertain and lacking in confidence the financial sector is at the moment, but customers of Aviva have nothing to fear – thankfully!