What is a boiler room scam?
Boiler rooms are financial operations which involve high-pressure selling tactics in order get investors to purchase shares that are either worthless or do not exist. The initial contact from a boiler room will often start with a telephone call that comes from out of the blue. These operations will obtain your contact details from a variety of sources, for example the old share registers. In recent years boiler rooms have evolved to employ different tactics whereby they offer to buy shares. In this situation they will offer to buy shares at a premium, perhaps stating this is due to an imminent takeover. They can also contact you with an offer to buy your delisted shares. Once this has been agreed they will then ask for an upfront payment in order to complete the sale, which will usually be masked as an overseas tax charge or dealing fee. Boiler rooms are almost always based outside the UK. In order to promote or sell shares in the UK, firms must be registered with the FCA. It is illegal to carry out this activity whilst unauthorised. This includes any firm that is based overseas and is operating within the UK.
If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.
If you ever receive an unexpected high-pressure telephone call and are concerned about the legitimacy of the company you should always ask for the caller’s full name, company name, company registration details, their telephone number and where they are located. You should then conduct your own independent research to check if the details you’ve been given correspond to the information available publicly. Bear in mind however that some boiler rooms may use legitimate companies’ details as their decoy. You can verify any contact you have received by contacting the company directly, using the details you have found independently rather than the ones given to you by the caller. Where you are dealing with a call regarding investments you should also ask whether they are authorised by the FCA and request their FCA reference number. You can check for FCA regulated firms by searching the Financial Services Register. You can also contact the FCA’s Consumer Helpline on 0800 111 6768.
How can I protect myself?
- Reject cold calls.
- Always do your own research.
- Remember, if something sounds too good to be true it most likely is.