As three men have this week been jailed for boiler room fraud totalling £27.5m, we explain what boiler room scams are, how to avoid them and how to report your suspicions if you’re approached by one.
What is a boiler room?
Boiler room fraudsters usually contact potential investors by telephone to con them into buying non-tradable or vastly overpriced shares. In many cases the shares simply don’t exist.
These fraudsters are unauthorised, normally overseas-based companies with fake UK addresses and phone lines routed abroad. In the vast majority of cases, investors lose all of their money.
I’ve been cold-called by a firm offering cheap shares
If you’re contacted by somebody trying to sell you shares, the Financial Services Authority recommends that you:
- Hang up the telephone if you receive an out-of-the-blue call offering shares
- Check the FSA Register to see if the person selling shares is authorised to do so
- Call the company back using the details on the FSA Register to verify its identity
- Report any company that cold calls you to buy or sell shares to the FSA or to Action Fraud
I think I’ve fallen victim to a boiler room scam
The FSA maintains a list of known unauthorised businesses. The list is updated regularly with details of businesses that are believed to be are involved in boiler room activities and could be dangerous to investors.
If you think you may have been contacted by a boiler room, call the FSA’s consumer helpline on 0845 606 1234. Which? members can also call the free Which? Money Helpline for advice if they think they may have fallen for an investment scam – see your latest magazine for contact details.
I’ve been offered cheap land – is that the same thing?
In a process known as ‘land banking‘, companies buy a piece of land and subdivide it into smaller plots, which they sell on to individual investors at an inflated price.
At the more dubious end of the market, firms cold-call potential investors, offering undeveloped, usually greenfield land for sale, with the promise of huge returns when planning permission for development is granted. Glossy marketing material quotes experts, politicians and studies extolling the need for affordable housing and urban redevelopment.
It can be very difficult to differentiate between a real land banking scheme and an investment scam. If you are interested in land investments, speak to an independent financial adviser about safer options including FSA-registered land companies, pooled agricultural fund investments or shares in companies that invest in land.
I’ve been contacted by a company offering to get my money back
Some boiler room fraudsters exploit their victims’ desperation and contact them again, this time posing as a company that says it can get your money back for you, in exchange for an up-front fee. This is known as a recovery scam. Don’t pay any money – and report the scam.
The same goes for companies offering to buy your boiler room shares from you – chances are this is another scam.
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