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