Share Sale Fraud

17/11/2008

Protect yourself from share sale frauds

If you get an unexpected phone call from people you don’t know trying to sell you shares it may be a share sale fraud (also known as boiler room fraud because of the high-pressure sales techniques). Boiler room firms run a financial fraud using convincing sales tactics to persuade you to buy shares which are of little or no value.

You will almost certainly lose all the money you spend.

It is not just the novice investor who can be duped in this way. The vast majority of share sale fraud victims are experienced investors, with 41 per cent of victims saying they had been investing for over 11 years. The Financial Services Authority estimates that between £200 and £500 million is defrauded from victims in the UK every year.

If you deal with a share sale fraudster or boiler room you will have no right to complain or to claim compensation in the UK, as these organisations are based overseas, despite what the caller may say, and are not authorised by the FSA to do business in the UK.

Generally it’s against the law to ‘cold call’ a person to try to sell shares or other investments. So if you haven’t invited the call just hang up.

How to recognise a share sale fraud

The first time you hear from a share sale fraud could be by post or email. They may have written to you offering a free research report into a company in which you hold shares, or a free gift or a discount on their dealing charges.

You will then receive a phone call from a well trained, highly professional sounding salesperson. They can be very persistent, never taking ‘no’ for an answer. They often use a script to help them answer your questions or ward off your objections. They phone their victims every day until they finally make a sale, or until you hang up.

They will often claim to be from legitimate firms, or firms which sound legitimate and have professional looking websites.

You may be told that you have already entered into a contract to buy the shares and are under an obligation to pay. This is not the case as such contracts are unenforceable under UK law.

How to protect yourself

Before handing over any money to a financial firm always ensure it is on the FSA Register (www.fsa.gov.uk/Pages/register/) and is allowed to give financial advice.

Double check the caller is from the firm they say they are: ask for their name and telephone number and say you will call them back. Check their identity by calling the firm using the contact number listed on the FSA Register.

Check the FSA’s list of known authorised overseas firms at www.fsa.gov.uk/pages/doing/regulated/law
/alerts/overseas.shtml

If you have any doubts call the FSA Consumer Helpline with details, or complete the FSA’s unauthorised firms reporting form online (www.fsa.gov.uk/pages/doing/Regulated/Law
/Alerts/form.shtml).

Useful contacts

FSA Consumer Helpline – to check a firm is authorised or to report a share sale fraud
Tel: 0845 606 1234* Minicom/Textphone: 08457 300 104* (*call rates may vary)

APCIMS (the Association of Private Client Investment Managers and Stockbrokers) for a list of its member firms, all of which are FSA authorised. See www.apcims.co.uk and click on Find A Broker.
Tel: 020 7448 7100

Useful FSA links