I’ve just been warned by my bank warning me about Boiler room scams.
To be honest I had never heard of them so was very pleased that I had received such a letter. There are many scams being perpetrated and my bank advised me to go to the Financial Services Web page so I did. I then realized there are millions of people falling victim to scams every year, from experienced investors to people dealing with a large sum for the first time.
I pass on what I found on the FSA website. (now FCA)
How it works
Boiler room scams usually come out of the blue, with fraudsters cold-calling investors after taking their phone number from publicly available shareholder lists. The high-pressure sales tactics can also come by email, post, word of mouth or at a seminar.
These share scams are sometimes advertised in newspapers, magazines or online as genuine investment opportunities. They may even offer a free research report into a company in which you hold shares, or a free gift or discount on their dealing charges. You will often be told that you need to make a quick decision or miss out on the deal.
The scammers might also try to sell you shares in a company you have never heard of, often because it does not exist. If you buy these shares, it is likely you will be left with a worthless investment.
How to protect yourself
It is strongly advised to only deal with financial services firms that are authorised and check our Register to ensure they are. Keep in mind that authorised firms are unlikely to contact you out of the blue with an offer to buy or sell shares.
Find out the steps you should take to protect yourself from boiler room fraud and how to stay safe from more investment scams.
What to do if you have been scammed
FCA receive almost 5,000 calls each year from people who think they are victims of boiler room fraud. Unfortunately about 20% of these people have already paid money to the criminals, but this is down from about 60% a few years ago.
It takes an average of about four calls from the scammers before people contact us, but the sooner you do the less likely you are to be defrauded.
If you are concerned about an investment you should stop sending money to the firm and individuals involved. If you have given them your bank account details, tell your bank immediately.
Please provide as much information as you can about your investment and the company involved, including their contact details and ’firm reference number’ (FRN).
The more information we have, the better our chances of assessing whether the company is selling, promoting or advising on shares or other investment opportunities without our authorisation.
You should also report suspected boiler room fraud to the police.
If you sent money to a UK or overseas bank account, or by another type of money transfer, contact Action Fraud on 0300 123 2040.
If you have already bought or sold shares through a boiler room, be especially careful as fraudsters are likely to target you again or sell your details to other criminals. The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or buy back the shares after you pay an administration fee.
They are often based overseas in countries like Spain, Switzerland or the USA where they will be beyond the jurisdiction of UK law and the Financial Services Authority.
Share fraud and boiler room scams
Share scams are often run from ‘boiler rooms’ where fraudsters cold-call investors offering them worthless, overpriced or even non-existent shares. While they promise high returns, those who invest usually end up losing their money. Find out how the scams work and what to do to avoid becoming a victim.
Boiler rooms use increasingly sophisticated means to approach investors offering to buy or sell shares in a way that will give investors a huge return. But in the end, victims are often left out of pocket – sometimes losing all of their savings or even their family home.
We have found that victims of boiler rooms lose an average of £20,000 to these scams, with as much as £200m being lost in the UK each year. Even seasoned investors have been caught out, with the biggest individual loss recorded by the police being £6m.
REMEMBER: IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS!