Boiler room scams are on the rise. Find out how to make sure you don't fall victim.
Back in February, the industry watchdog, the Financial Services Authority (FSA) warned there had been a huge increase in share selling scams - otherwise known as boiler rooms.
But, w?hat’s even more worrying is the FSA has recently recovered a master list through its intelligence network which contains the names and addresses of more t?han 38,000 people in the UK who could be specifically targeted by boiler room share fraudsters. This is the biggest list of its kind ever found by the regulat?or, and it's been nicknamed 'The Sucker's List'.
Thankfully, the FSA is in the process of contacting everyone on the list to ask them to be on their guard, and to advise them on how to avoid falling victim. But the list is still believed to be in active use in this country and abroad.
What is a boiler room?
Boiler rooms often target people who buy s?hares, or have done so in the past, and may have an appetite for an ‘exciting investment opportunity’.
A boiler room is a scam where you’re targeted by a fraudster who claims to have a not-to-be-missed opportunity to buy shares - or possibly even to buy back shares you already own. These types of scams are normally perpetrated by phone in a cold calling exercise.
Once the bogus ‘salesperson’ or ‘stockbroker’ has convinced you to hand over the money, you’ll eventually find the shares you have purchased are worthless, non-tradable, overpriced or don’t actually even exist. Your investment is then lost forever, while the company you bought them from has long since disappeared into thin air with your cash.
Donna Werbner gets your two pence on the scams you hate, and finds out how you can protect yourself and stop the scammers from stealing your cash.
Boiler rooms are usually unauthorised companies which are based abroad, but take on fake UK addresses and telephone numbers which are then routed back overseas. The ‘salesperson’ who contacts you may be very persuasive with false claims of the huge returns you’ll reap on your investment.
Bogus companies have also been known to clone the websites of authorised companies and make contact by email to defraud people with fake investment schemes.
How can you protect yourself?
First of all, cold calling to sell shares isn’t normally permitted under FSA rules, so you should be highly suspicious if you’re contacted in this way with “an offer you can’t refuse”. If this ever happens, get contact details from the person you are speaking to, then hang up the phone and immediately report the company to the FSA or the police.
Always remember if an investment opportunity sounds too good to be true, or promises massive rewards in return for very little risk, you should always smell a rat.
Similarly, if you feel pressured into acting immediately or miss the chance of a lifetime then you may have been targeted by boiler room fraudsters. No one should be expected to part with significant chunks off cash without been given the time to fully consider the deal on the table.
Recent question on this topic
- ADH asks:
Ever heard of a company called Xiiva in Canada? Got some sharesvia boiler room someone wants to buy them -- is this the second phase of the scam?
- MikeGG1 answered "Yes, it has all the hallmarks of Phase 2. See also the following which may be 2 years old but..."
- Swarbs answered "Very likely to be a scam, as Xiiva was petitioned into bankruptcy in Canada on the 25th May 2008,..."
- Read more answers
If you can’t really gauge whether a company is legitimate or not - and let’s face it, fraudsters can appear highly credible - check that it’s authorised by the FSA to sell shares. The company’s details should appear on the FSA register if it’s genuine. You can check the register here. Remember you should only ever deal with financial companies which are properly authorised.
Having said that, this check isn’t failsafe. Some boiler rooms have been known to adopt the name of a bonafide, FSA-authorised company as a cover. In this case, you should call back the person who has contacted you using the telephone number listed on the register. This should help you verify that they really do work there, and the company is above board.
Another measure you can take to protect yourself is to the take a look at the FSA’s list of unauthorised overseas companies. These companies have been known to target people in the UK with boiler room scams. You can check the list here. But don’t assume just because a company isn’t listed it’s automatically safe because it may not be.
What should you do if you think you have been targeted by a boiler room?
If you think you may have been targeted by a boiler room, you should call the FSA's customer contact centre straightaway on 0845 606 1234.
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