MoneyMagpie

Aug 12

How to avoid boiler room scams

Reading Time: 2 minutes

I’ve said it before and I’ll say it again – watch the movie ‘Boiler Room’. It’s a good view and it will give you an idea of how these nasty, fraudulent operations work.

“Boiler Room” scams involve bogus stockbrokers, usually based overseas, cold calling people to pressure them into buying shares that promise high returns. In reality, the shares are either worthless or non-existent.

If you saw the documentary on ITV last week about the boiler room scammers that were finally prosecuted, you will know how nasty they are and how much money they take from so many people. There were people who lost their life savings over this.

These operations are becoming increasingly more sophisticated. New lines in sales patter flatter investors and make you think you know what you’re doing when you agree with them.

The shares mentioned in these high-pressure sales calls, if they exist at all, will be listed on small and difficult markets and they are also ramped up through social media and online message boards.

Unfortunately in about 20% of reported cases, people have sent money and people rarely get it back.

Here are five tips to avoid boiler room scams:

  1. Beware of cold callers offering opportunities that look too good to be true – they probably are.
  2. Remember, investors do not have the same protection when dealing with unauthorised firms – find out their name and look them up online. In fact, call the FCA or the Financial Services Compensation Scheme FCSC to check if they are authorised.
  3. Avoid giving out your personal details.
  4. Find out where the enquiry is coming from; most boiler room scams are based abroad. Common countries include Switzerland, Spain, Dubai and the USA.
  5. Remember that if an offer really is that good, whoever is calling you should be investing in it themselves rather than telling you and everyone else about it. Isn’t that what you would do if you came across a ‘sure-fire great bet’?

WHAT DO YOU THINK?

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