Boiler Room Scams - what they are and how to avoid them

Boiler Room Scams - what they are and how to avoid them

What is a Boiler Room?

Boiler Rooms are businesses that use high-pressure sales techniques to sell "sure thing" investments with the promise of massive returns. In fact, what they're selling is worthless stock in often unquoted companies that are either overvalued, or that simply don't exist at all.

How they work

Boiler Room operatives generally cold-call their targets, using phone numbers from publicly-available shareholder lists. So if you own stocks and shares you could be targetted.Because it's against the law for brokers to cold-call in the UK, they tend to be based abroad (often Spain, Portugal, Switzerland, or even the US) where they're beyond the jurisdiction of the Financial Services Authority (FSA) so they can approach anyone, anywhere. One thing to remember is that although the person at the end of the phone will appear knowleadgeable they are actually just telesales people and do not possess the knowledge that they will make you believe they have.

Boiler Room techniques

A Boiler Room can look and sound legitimate. They may mention companies you've heard of, give themselves a UK address or phone number, and possibly even have a professional-looking website. They're notoriously persistent, and can hound a victim for months in the hope of a sale, catching out even seasoned investors. According to the FSA, Boiler Room scam victims lose on average 20,000. ( i can confirm they are very persistent having been targetted by them before and the best thing to do seems to put the phone down on them)

The bottom line is that if an opportunity sounds too good to be true, then it almost certainly is. Just remember that if the opportunity to make money was that good they certainly would not be advertising it!!

What to do if you're called

The advice is simple. If you think you're being targeted by a Boiler Room, the FSA's advice is not to worry about being polite - just hang up. You should then call the FSA contact centre on 0845 606 1234 with as much detail as you can remember. You'll find more information about Boiler Rooms on the FSA website www.fsa.gov.uk.

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