The Financial Services Authority (FSA) is set to contact more than 38,000 people across the UK to warn them that they could be the target of share fraud.
The move has been prompted by the regulator’s discovery of a ‘master list’ of contacts used by boiler room scammers, which was intended to help fraudsters trying to sell worthless shares to British consumers.
Boiler room scams
Boiler rooms are teams of fake share dealers who aim to cheat investors out of their money by selling them shares with no value.
Boiler room tactics include contacting potential investors directly, often by telephone, and using aggressive marketing techniques to pressurise people into parting with their cash.
The FSA estimates the cost of boiler room fraud in the UK to be £200m a year, and says the average victim of boiler room selling loses £20,000.
Because many boiler rooms operate illegally from overseas and are not authorised to sell shares in the UK, people who lose money through this kind of fraud are unlikely to be covered under the Financial Services Compensation Scheme – and therefore stand little chance of getting their money back.
Boiler room ‘suckers’ list
The FSA says the list it has found contains the details of 38,242 people who may be contacted out of the blue by boiler rooms and asked to invest money.
Jonathon Phelan, the FSA’s head of unauthorised business, said: ‘This is the biggest list we’ve ever recovered and by acting quickly and contacting every single person on it we’re hoping we can stop people losing money.’
Most of the individuals listed are based in London and the South East, but a significant number of the fraudsters’ targets live in Yorkshire and Lancashire.
Avoiding share scams
The FSA has offered the following advice for anyone concerned that they might fall victim to boiler room fraud:
- Hang up the telephone if you receive an ‘out of the blue’ phone call offering you shares
- Check the FSA register to see if the person offering to sell you shares is authorised to do so
- Call the company that has contacted you back using the details listed in the FSA register to verify their identity
- Report any company that cold calls to sell you shares by contacting the FSA or the police.
Anyone who thinks they may have been targeted by a boiler room should call the FSA’s customer contact centre on 0845 606 1234.
If you’re interested in making the most of your money by investing in stocks and shares, it’s important to do some research and understand the risks before committing to anything. The Which? Beginner’s guide to investment, plus the Stocks and shares Isas explained and Understanding investment risk advice guides are a good place to start.
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