High Interest Investment

Is the use of a surety bond for an investment a scam?

I have someone from London that wants to invest in my business but wants me to get a 1% surety bond, processed through London, to safeguard the investment. Does anyone have any insight into this concept?

Public Comments

1. It seem legit: A surety bond is a contract among at least three parties: The principal - the primary party who will be performing a contractual obligation The obligee - the party who is the recipient of the obligation, and The surety - who ensures that the principal's obligations will be performed. European surety bonds are issued by banks and are called "Bank Guarantees" in English and "Caution" in French. They pay out cash to the limit of guarantee in the event of default of Principal to uphold his obligations to Obligee, without reference by Obligee to Principal and against obligee's sole verified statement of claim to the bank. Through a surety bond, the surety agrees to uphold — for the benefit of the obligee — the contractual promises (obligations) made by the principal if the principal fails to uphold its promises to the obligee. The contract is formed so as to induce the obligee to contract with the principal, i.e., to demonstrate the credibility of the principal and guarantee performance and completion per the terms of the agreement. The principal will pay a premium (usually annually) in exchange for the bonding company's financial strength to extend surety credit. In the event of a claim, the surety will investigate it. If it turns out to be a valid claim, the surety will pay it and then turn to the principal for reimbursement of the amount paid on the claim and any legal fees incurred. If the principal defaults and the surety turns out to be insolvent, the purpose of the bond is rendered nugatory. Thus, the surety on a bond is usually an insurance company whose solvency is verified by private audit, governmental regulation, or both. A key term in nearly every surety bond is the penal sum. This is a specified amount of money which is the maximum amount that the surety will be required to pay in the event of the principal's default. This allows the surety to assess the risk involved in giving the bond; the premium charged is determined accordingly. Surety bonds are also used in other situations, for example, to secure the proper performance of fiduciary duties by persons in positions of private or public trust. Annual US surety bond premiums are approximately $3.5 billion.[1] State insurance commissioners are responsible for regulating corporate surety activities within their jurisdictions. The commissioners also license and regulate brokers or agents who sell the bonds
2. Well, I don't know how it works in London, but when you make a business with someone, you either invest equal 50%50%, either you meet the person in real life, have some refference from others, so the business tarts with trust. If not, and you make this business directly, you must provide some, guarantee that you can be trusted.
3. an "investment" in a business entails risk - the investor should know that - doesn't sound right that his "investment" should be protected - if he want something safe - he should invest in bank CD's. I don;t even know what a surety bond is though
4. I work within the surety industry (JW Surety Bonds) and can tell you, these bonds may have been written in years past, but no longer. I would advise the other person as such and tell them to do some quick searches online to find out the same. I also provided a link for the surety bond forums, where you can ask surety related questions for free if you'd like. I should mention that the U.K. and U.S. surety markets are very different so I cannot say the U.K. bond market does not write them. For that I provided a reputable U.K. based industry that I have worked with in the past that you can ask.