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Boiler room tactics becoming less successful

Boiler room tactics becoming less successful

Category: Money

Updated: 17/04/2012
First Published: 17/04/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Boiler rooms are making greater efforts to con consumers, but are having less luck, encouraging new figures show.

Share fraudsters, commonly known as 'boiler rooms', usually contact people by telephone and use high pressure sales tactics to con investors into buying non-tradable, overpriced or even non-existent shares.

The Financial Services Authority (FSA) says that it saw a 19% increase in enquiries about share fraud, commonly known as 'boiler room' fraud, with 5,401 reports made compared to 4,527 in 2010.

However, despite the increase there was a 7% drop in 2011 (from 831 to 770) in the number of people who having been contacted by a boiler room, then invested.

While this may not seem very substantial, the average loss suffered by consumers duped by the con artists is currently around £20,000, meaning a significant amount of money is likely to have been saved

Boiler rooms are unauthorised, overseas-based companies with bogus UK addresses and phone lines routed abroad.

And it appears they are turning to new tactics to trick people out of their money.

The watchdog says it has seen an almost three-fold increase in the number of reports about boiler rooms cloning genuine authorised firms in a bid to make their pitches more believable.

"It is encouraging that the number of people who actually parted with their money has dropped," commented Jonathan Phelan, head of unauthorised business at the FSA.

"This suggests that our warnings about unauthorised firms are getting through and people are better prepared when they are called out of the blue. So far, the figures for the early part of 2012 show this trend continuing - but it is too early to draw any firm conclusions just yet.

"A 7% drop in the number of investors might seem small, but in this case it represents 61 people. Our research shows that the average investor loses around £20,000, so it is possible that around a million pounds in consumer losses may have been prevented."

The FSA is reminding people to protect themselves against these firms by taking steps such as asking for contact details of sales people that call, checking a firm on the FSA register and checking the watchdog's 'warning list' to see if the firm is a known boiler room.

"We will continue to fight all forms of unauthorised business but the strongest weapon against scams remains common sense and a little bit of homework: check who you are dealing with and never forget that if it sounds too good to be true - it probably is," added Mr Phelan.

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