Thousands of British investors continue to be duped by ’boiler room’ share scams. Don’t be their next victim.
Boiler room fraud began in the US back in the 1920s but the method has stayed much the same ever since. Operating from the cheapest premises they can find (the boiler room in the basement), telephone salesmen try to con people into buying worthless shares or paying far more for shares than they are worth.
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There is a plague of this in the UK at the moment, almost all of it from firms operating from the US or Spain. Because I am on several shareholder registers, I get a few of these calls every week.
Don’t fall for the flim-flam!
Almost nobody tries to practise investment fraud in the UK any more, because most investment activity is regulated by the Financial Services Authority, which can not only close firms down but get scamsters sent to jail.
Typically, scamsters get people’s names from share registers. Every UK PLC is obliged by law to provide a copy of its shareholders register to anyone who asks for it. The government is proposing some new restrictions on this that would make it harder for scamsters to get the register, but at the moment it’s easy.
In the crudest operations, the scamsters get names and numbers and hit the phones, telling stories of huge profits to be made when some piece of ’inside information’ they have becomes public.
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’Researching’ how to con you
Such cold calling is illegal in the UK. To avoid this simple breach of the law, in a more sophisticated version the firm publishes a ’research note’ on the company in which you hold shares and sends it to you, inviting you to contact them to get more such reports.
As soon as you do so, you have effectively asked them to contact you so they are within the law in calling you to discuss other investments. If there’s a UK mailing address for the reports, it’s usually just a forwarding address.
Some of the companies the scamsters try to sell shares in are entirely fraudulent and do not exist. They may have a website with lots of information but this is simply a front and there’s no real business at all.
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Don’t buy shares sold by email or over the phone
In other cases, the firm does exist, but it has several classes of shares. The scamsters sell you a variety that is worth much less than the ones that have a stock market listing.
The first question you should ask anyone who tries to sell you investments is if they are authorised by the Financial Services Authority. Why? Because, if they are then if something goes wrong you may be entitled to compensation. It’s easy to check if a firm is authorised. Keep it simple - don’t deal with anyone who isn’t authorised.
Use FSA’s firm check service
Common sense should tell you that if there were such great opportunities to make money, then the salesmen would have no need to call people in another country because they would have far too many takers. The truth is that there is no easy money in the stock market.
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Not such easy money in land
The same is true of property. Several firms have been selling plots of land in the English countryside on the basis that investors will make a packet if they can gain planning permission. Contrary to what the firms claim, in many cases the chances of this are close to zero.
Because property is not an investment regulated by the FSA, these firms have set up in the UK. But several have been closed down recently by the Department of Trade and Industry. And the FSA also believes that some firms have stepped into the regulated area by offering what are effectively collective investment schemes, which are subject to regulation whatever the actual investment inside them. If this is the case, the firms offering the schemes are breaking the law because they have not obtained authorisation from the FSA.
The stock market offers great opportunities for investing and speculating (day trading is just a form of speculation). Using properly authorised UK firms, you can wheel and deal and use spread betting and Contracts for Difference to gear up your investments by 10 or 20 to 1. If you like a gamble, then do it this way and even if you lose, and you will at least some of the time, at least nobody will steal your money or tell you a pack of lies.
FSA’s guide to share scams
