With the current drop in interest rates many small investors are seeking better returns for their money than from simply leaving savings with banks or building societies. Unfortunately this has led to a huge increase in reported Boiler room scams.
A Boiler Room is a bogus stockbroker, usually based overseas, which cold-calls investors and pressures them into buying worthless shares. They could be a small, unquoted company that the broker claims is planning to list and, in extreme cases, the company will not exist at all and the broker is simply selling shares in thin air before taking the money and running.
In the current economic climate, Boiler Rooms are starting to target victims who have redundancy money or those who are not experienced investors. The biggest individual loss to date recorded by the City of London’s Operation Archway is £1.2M.
Some victims have even been pestered to sell previously highly regarded 'blue chip company shares', and to invest in green and new technology shares marketed by the Boiler Rooms.
The fraudsters are usually well spoken and knowledgeable - and very persistent.
Most frauds or scams share similar features which may alert you to the fact that they are not genuine:
- if it sounds too good to be true it probably is
- you are asked for money up front to pay unexpected fees (such as customs) before your 'prize' can be released
- you are asked to provide your bank account, credit card details or other sensitive personal information
- you are put under pressure to reply immediately or the money will be given to someone else
- you are asked to keep the details secret
Anyone who believes they have been a victim of a boiler room scam, should contact the FSA and the City of London Police. The police have a large task force, Operation Archway.
Consumers that have been targeted by a boiler room operation can report information via a form on the FSA website or by calling the FSA contact centre on 0845 606 1234.