Boiler room fraudsters were busier than ever last year, reports Simon Read. According to new statistics from the Financial Services Authority, the number of reports the City watchdog received about the share fraud grew by a fifth last year.
Boiler rooms are set up by crooks who flog worthless or fictional shares to unsuspecting investors. Their salespeople use high-pressure tactics to trick people into parting with cash for bogus shares. They are normally unauthorised, overseas-based companies with fictional addresses and UK phone numbers to give themselves credibility. But the phone lines are routed abroad and anyone tricked can expect to be fleeced for an average £20,000.
Last year the number of boiler-room reports soared to 5,401, compared to 4,527 in 2010. But the good news is that investors appear to be wising up to the menace, with fewer falling for the trick. In 2011 there was a 7 per cent drop – from 831 to 770 – in the number of people who invested in a boiler-room scam.
"The strongest weapon against scams remains common sense and a little bit of homework," advised Jonathan Phelan, the FSA's head of unauthorised business. "Check who you are dealing with and never forget that if it sounds too good to be true – it probably is."
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