Boiler room fraud
Information about boiler room fraud and what to do if you've been a victim.
On this page:
What to do if you have been a victim
What is a boiler room fraud?
A boiler room fraud is where a bogus stockbroker cold-calls investors and forces them into buying worthless shares. They are usually based abroad.
Their favourite targets are middle-aged people who have bought shares before. Their names are usually on share registers.
The fraudsters are usually well spoken and know a lot about shares. They often have experience of working in the stocks and shares market. They are persistent and will call their victim several times.
The fraudsters may say that a company is about to announce a major discovery in technology or mining. They say that this will increase the price of its shares.
The Financial Services Authority (FSA) recommends that potential investors check its website both for a list of boiler rooms.
They can also find out if the so-called stockbroker is authorised in the UK.
The regulator is unable to take action if the boiler room is not based or authorised in Britain.
Victims are vulnerable as they will not be able to claim compensation from the FSA or the Financial Ombudsman Service if something goes wrong.
A check can also be made with the US Securities and Exchange Commission to check if the company is regulated in the United States.
What are the warning signs?
These scams often contain similar features. These are:
- You are asked for money up front to pay unexpected fees (such as customs) before your shares can be released
- You are put under pressure to reply immediately or the offer will be given to someone else
- You are asked to keep the details secret
- The company will usually be based overseas
- It is illegal for UK based firms to cold-call an investor to attempt to sell shares
- The boiler room may have a UK listed phone number to look like they're based in the UK
- A check with the FSA will confirm if they are legitimate or not.
What to do if you have been a victim
If you believe that you have been the victim of a boiler room fraud please contact your local police station to report the matter.
The City of London Police is responsible for co-ordinating the UK intelligence collation system for boiler room fraud.
Reports should be made to them: operationarchway@city-of-london.pnn.police.uk
