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At Equiniti we feel it is important to keep you up to date with all that is going on in shares and investment. This includes any information on scams that are currently being run. The information below was provided by the Financial Services Authority (FSA). We feel that it is important for you to read this information fully. If you have any concerns or wish to report a scam please contact the FSA.
FSA Consumer Helpline (to check a firm is authorised or report a boiler room)
- Consumer Helpline: 0300 500 5000*
- Minicom/Textphone: 08457 300 104*
*(call rates may vary)
Share investment scams (also known as boiler room scams)
It sounds obvious, but if a stranger rings you out of the blue and tries to sell you shares in companies you've probably never even heard of or offers a vastly inflated price for shares you already own, take great care. They may be part of a financial scam using hard-sell tactics to persuade you to buy shares or part with an advance fee in return for greater reward.
What is a ‘boiler room’ scam?
Boiler rooms earn money by calling UK investors, without invitation, and selling shares to them. These shares often carry very high risk - they may be worth a lot less than you pay and you may not be able to sell them easily afterwards. If you buy them, you may be left with potentially worthless shares. You may also have no rights to complain or claim compensation from the relevant UK schemes as most of these boiler room scams are based overseas, often with addresses in Europe, Asia or America.
One particular type of share often used are US ‘Regulation S’ shares. There are restrictions placed on these shares and they can only be traded 12 months after their purchase, by which time their value may have fallen dramatically.
How does it operate?
The first time you hear from such firms could be by post or email, or they might advertise their services over the internet. They may offer you a free research report into a company in which you hold shares, or a free gift or a discount on their dealing charges.
BUT:
- By signing on the dotted line, you have probably agreed to be contacted by the firm in the future. This was probably written in the small print of the mailshot.
- The UK freepost address on the return envelope may simply be a forwarding address to an overseas address.
- Websites can be bogus, even if they look impressive. Don’t believe everything you read on the Internet.
Boiler room salesmen can be very persistent, never taking ‘no’ for an answer. They phone their victims every day until they finally make a sale. Don’t be fooled by the callers’ smooth manners, technical jargon or special offers. They are well trained and often use a script to help them answer your questions or ward off your objections. They will try to charm you or pressure you into buying something you are likely to regret.
Once you agree to buy shares you will be asked to send in your money in exchange for share certificates. Sometimes you may receive share certificates for shares worth much less than you have paid. Sometimes the boiler room will simply disappear and you will never see your money again.
Sometimes you may be told that you have already entered into a contract to buy the shares and that you are under an obligation to pay. This is not the case. Such contracts are unenforceable under UK law.
Another variation of the scam is to offer a vastly inflated price for your existing shares, claiming the firm is representing a wealthy investor preparing a takeover bid. This offer is dependent on you paying an advance fee in the form of an “indemnity bond” or similar.
How can I protect myself?
If you are approached by a firm ‘out of the blue’, be on your guard. Generally it’s against the law in this country to ‘cold call’ a person to try to sell you shares or similar investments.
Always make sure that the firm you use is on our Register (see Useful FSA Links) and is allowed to give financial advice before handing over your money. If they aren’t regulated by us and things go wrong, you won't have access to complaints and compensation procedures.
However, don't just assume that because their name appears on our Register they are who they say they are. We know some callers may use the names of firms or individuals from our Register to make you think they are legitimate. It's unusual for firms to call you out of the blue, so be wary if you're not expecting a call.
If you are in any doubt:
- ask for the contact details of the person calling you; and
- check their identity with the firm they claim to work for, using the contact details on our Register.
Don’t listen to excuses about the caller using a direct line – if the call is genuine a trustworthy firm won't mind you being careful. Report any suspicions to the firm and our Consumer Helpline (see Useful FSA Links).
The FSA has a list of known unauthorised overseas firms on its website (see Useful FSA Links). However, remember that this type of firm is likely to change its name frequently, so if you can’t find a particular name on these lists that still doesn’t mean it’s genuine.
If the firm calling you is not on our Register, please call our Consumer Helpline (see Useful Contacts) with as many details as possible, or complete our online Unauthorised firms reporting form (see Useful FSA Links). This will help us try to stop them and warn other people about them.
Do some research, for example, often consumers will discuss suspected boiler rooms on chat rooms such as Motley Fool.
Get independent advice – speak to an authorised stockbroker or financial adviser before you commit any funds (see Useful contacts)
Remember:
- if you’re dealing with an unauthorised firm, you might never see your money again.
- you don’t have to talk to them, you can put the phone down.
Useful contacts
FSA Consumer Helpline
(to check a firm is authorised or report a boiler room)
- Consumer Helpline: 0300 500 5000*
- Minicom/Textphone: 08457 300 104*
*(call rates may vary)
IFA Promotions
(for a list of authorised independent financial advisers in your area)
Tel: 0800 085 3250
www.unbiased.co.uk
Useful FSA links
FSA Register
http://www.fsa.gov.uk/Pages/register
List of unauthorised overseas firms
http://www.fsa.gov.uk/enforcement/firms_overseas.html
Unauthorised firms reporting form
http://www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/form.shtml
Other useful links
City of London Police – Operation Archway
http://www.cityoflondon.police.uk/CityPolice/ECD/Fraud/boilerroom.htm
Securities and Exchange Commission
http://www.sec.gov
