23 June 2006

Brewin Dolphin Securities today announced it has recorded a worrying increase in the number of British investors being targeted by ‘boiler room' financial fraudsters. Boiler room operatives use high pressure telephone sales techniques to persuade investors to purchase shares whose real value is significantly less than the sale price. Boiler rooms are not regulated or authorised by the Financial Services Authority (FSA), they act as illegal brokers facilitating and promoting the sale of shares in the UK . The average victim of a boiler room scam loses a staggering £20,000 *. There is typically little or no legal recourse for victims of these fraudsters.

Investors with legitimately purchased shares are at greater risk of being targeted by perpetrators of illegal boiler rooms. Boiler rooms utilise publicly available data from company share registers to establish lists of potential targets. Brewin Dolphin is advising investors they can reduce their exposure to these scams by transferring shares to a nominee account, which will remove their name from the public domain and make them invisible to fraudsters.

A reputable broker can establish a nominee account to register and administer investors' holdings. Nominee accounts benefit investors because they simplify and accelerate the settlement process. They allow the broker to register and administer an investor's holdings, including collecting and distributing dividend and interest income directly into a client's bank account.

Charlotte Black, Marketing Director, Brewin Dolphin Securities said:

“It is vital investors ensure they only trade through companies that are fully compliant with FSA regulations. Investors should only accept financial advice or enter into transactions with qualified financial advisers. With a bewildering array of investment options available, it is crucial people seek professional advice to ensure the financial products selected are tailored to their own financial needs and risk profile."

“The high pressure techniques employed by boiler room operatives include repeated calls and a sustained campaign of harassment. However, the perpetrators may sound highly educated and knowledgeable about the sector quoted and the wider investment marketplace. Boiler rooms often prey on investors looking for high yield, low risk returns within a short time frame.”

Boiler rooms disadvantage private investors and also on occasion the companies whose stock they trade. UK Companies authorising a boiler room to act as their brokers could fall foul of legislators, in most circumstances it is a criminal offence for a private company to offer shares for sale to the public. Boiler rooms have also been heard of charging a disproportionate commission which has been known to be up to 90%**.

Research conducted by Brewin Dolphin last year revealed that many adults take a financial risk when making investments by relying on advice from unqualified sources. When purchasing unit trusts nearly a third *** (31%) of investors – over 3.4 million nationwide – turned to friends, family or colleagues for advice on which product to select and 37% conducted their own research. In both cases investors turned out to be 10% less satisfied with its performance than those who consulted a financial adviser.

*http://www.fsa.gov.uk/pages/Library/Communication/PR/2006/053.shtml

**http://www.fsa.gov.uk/pages/Library/Communication/PR/2005/039.shtml

***1,014 adults were interviewed by research company ICM. Fieldwork conducted between 24 th and 25th August 2005