FRAUD FACTS Issue 6 December 2010 INFORMATION FOR INDIVIDUALS

Boiler room A boiler room fraud is a type of investment fraud which uses high pressure, cold call sales techniques to induce people to buy worthless or bogus and shares.

Introduction offering stocks and shares for sale is authorised by the FSA to conduct investment in the UK. If they Investors can be attracted by promises authorised by the Financial Services are not authorised, do not do business with of high returns with little or no risk. But Authority (FSA) to conduct investment them. investments that seem too good to be true business in the United Kingdom. Otherwise usually are. Many types of investment fraud you will not be able to access complaints If you encounter any of these issues – entice potential investors by promising procedures or compensation through the proceed with caution! Investigate further unrealistic returns. Financial Services Compensation Scheme and seek advice from an independent if things go wrong. professional financial advisor. Investment fraud is big business and can take many different forms. The warning signs Reporting fraud One type of investment fraud that is Be aware of the warning signs of a boiler becoming increasingly common and If you think you may have become the room fraud: sophisticated uses high pressure sales victim of an investment fraud report it to your local police station or to Action Fraud techniques to mis-sell worthless or bogus • Unsolicited contact, usually from by calling 0300 123 2040 or visiting the shares to defraud monies from unwitting overseas: You receive an unsolicited website www.actionfraud.org.uk. investors. UK investors are estimated telephone call, letter or email from a to lose over £200 million each year to ‘’ offering you the You may also wish to complete the City share-related fraud. opportunity to invest in shares that of London Police’s online survey to help promise a high rate of return. It is illegal law enforcement better understand the What is a boiler room fraud? for UK-based and firms to problem by visiting the website http:// cold call investors to sell shares. Hang up www.cityoflondon.police.uk/CityPolice/ According to the Serious Fraud Office, and ignore future phone calls. Departments/ECD/Fraud/boilerroom.htm. boiler room fraud (sometimes called ‘share scams’) is ‘the of victims by • High-pressure sales pitches: Bogus If you have been contacted by an fake stockbrokers persuading them to buy stockbrokers are often very convincing, unauthorised overseas firm trying to sell stocks or bonds that are worthless or persistent and use high-pressure sales you shares, report it to the FSA by visiting non-existent’. tactics. Some use abusive or threatening the website http://www.fsa.gov.uk/pages/ doing/Regulated/Law/Alerts/form.shtml. Most boiler rooms operate from call centres language to intimidate potential victims. based overseas, predominantly in Europe, Do not be pressured into something you Asia and the USA. Some use UK telephone are unsure of. Recovering your money numbers or postal addresses to disguise • Unique investment opportunities: Most victims of boiler room never this, or may even impersonate genuine Shares may be offered in small unquoted get their money back. UK firms. companies, in new technologies or to a Reporting the matter to the police or to Boiler rooms target both novice and selected few by ‘invitation only’. Be wary Action Fraud will often represent the most experienced investors. The average loss if you are asked to keep details of the realistic prospect of recovering any money. per victim is about £20,000. proposed investment secret. If it sounds too good to be true, it probably is. For victims who have lost a significant sum of money, it may be possible to pursue Thinking about investing? • Request personal or financial civil recovery proceedings to recover losses. Before you invest it is important that you information: Some boiler room frauds To maximise the prospects of success it is understand exactly what it is you are request payment of an upfront fee for important to act immediately upon buying. While there are many types of taxes or as security. Do not provide your discovery of the fraud and seek professional legitimate investments available, there are bank account, credit or debit card details legal advice. also many which are fraudulent. But by or other personal information until you If you become a victim of a boiler room doing some research and looking for are certain that you are dealing with a fraud, be wary of any organisation which common warning signs you will be able legitimate firm. contacts you and offers to recover your to avoid being scammed. • Not authorised by the FSA: money on payment of an upfront fee. Always check that any stockbroker or firm Stockbrokers and firms must be This may be a ‘recovery room fraud’. How to protect yourself Further information

DO: DO NOT: Helpful websites for making informed investment decisions.  Seek professional and independent  Believe everything you are told. financial advice. Action Fraud  Buy investments from unauthorised www.actionfraud.org.uk  Ask questions! Make sure you individuals or . The FSA understand what type of asset you are publishes warnings about unauthorised Companies House investing in and the investment strategy firms (based in the UK and overseas) www.companieshouse.gov.uk behind it. offering financial products to UK investors on their website (see ‘warnings Consumer Direct  Compare the market to see whether the and alerts’). return you are being offered is realistic www.consumerdirect.gov.uk and consistent with those offered by  Be pressured to invest by cold callers, Financial Services Authority (Register) other similar investments. friends, family or acquaintances. www.fsa.gov.uk/register/home.do  Review historic returns and ensure that  Invest in schemes that promise returns these are in line with the market. based on recruiting new investors. Fraud Advisory Panel www.fraudadvisorypanel.org/  Check the FSA register to see whether  Agree to make an investment in a the individual or business is authorised high-pressure meeting or presentation. National Fraud Intelligence Bureau to conduct investment business in the  Invest in a multi-level marketing plan www.nfib.police.uk United Kingdom. or investment without professional and The Law Society  Know who you are dealing with. Look independent financial advice. the company up on the Companies www.lawsociety.org.uk  Invest in a scheme that has a secretive House website to see whether it is strategy or is too complex to understand. The Law Society of Scotland a registered company and review www.lawscot.org.uk its annual report and accounts.  Send money or give your bank account details to cold callers without having  Take your time to make an informed US Securities and Exchange Commission first checked whether the caller and investment decision. www.sec.gov investment are legitimate.  Report an investment fraud to Action  Forget that you can say no to an Fraud. The Fraud Advisory Panel gratefully investment opportunity. acknowledges the contribution of Charlie  Remember, if it sounds too good to be Dickin (KPMG) in the preparation of this true, then it probably is. Fraud Facts.

Fraud Advisory Panel, Chartered Accountants’ Hall, PO Box 433, Moorgate Place, London, EC2P 2BJ. Distributed by Tel: 020 7920 8721, Fax: 020 7920 8545, Email: [email protected]. Registered Charity No. 1108863

Disclaimer Dissemination of the contents of this Fraud Fact Sheet is encouraged. Please give full acknowledgement of the source when reproducing extracts in other published works. Whilst every effort has been made in the construction of this Fraud Fact Sheet, compliance with it does not guarantee that you and/or your business will not be a victim of fraud or criminality aimed against you and/or your business. The Fraud Advisory Panel and the contributors to this Fraud Fact Sheet accept no responsibility for any action taken by parties as a result of any view expressed herein. Readers are strongly advised to seek and obtain the appropriate professional advice on the issues raised which affect them or their business. © Fraud Advisory Panel, 2010

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OTHDIG9859 12/10 FRAUD FACTS Issue 6 December 2010