City of London Police offer advice on Boiler room fraud

The National Fraud Intelligence Bureau (NFIB) within the City of London Police is responsible for co-ordinating the national intelligence picture for share purchase fraud, more commonly known as boiler room fraud: a crime where investors are cold-called by bogus stockbrokers and persuaded to either buy worthless or non-existent shares, or to buy genuine shares at vastly inflated prices.

Important update: Investors warning

It has come to the attention of the National Fraud Intelligence Bureau that fraudsters are threatening investors with police action if they refuse to go ahead with an initially agreed transaction.

We would like to assure investors that the City of London Police do not and would not act as a debt collection agency in these matters.

If you have been offered an investment and consequently received a similar threat please inform your local police force (City of London Police contact details).

Are you a victim?

If you think you may have been a victim of this type of fraud, you should report the matter to your local Police Station or to Action Fraud. Action Fraud is the UK's national fraud reporting centre and also provides support and useful advice for victims of fraud. You can report the crime online at www.actionfraud.org.uk or by telephone 0300 123 2040.

What is boiler room fraud?

A 'boiler room' is a bogus stockbroking company, usually based overseas, which cold-calls investors and pressures them into buying worthless shares. Historically, those targeted were older people with previous experience of investments or share dealing, who typically lost £20,000 each to the fraudsters; 50% of investors today are aged over 65. The biggest

individual loss to date recorded by the National Fraud Intelligence Bureau (NFIB) is £1.2 million.

In the current economic climate, boiler rooms are starting to target victims who have redundancy money or those who are not experienced investors, and are asking for smaller sums of money to invest.

Those operating the boiler rooms have developed new strategies to target investors, such as a promise to recover monies lost to the original boiler room, or to purchase these worthless shares (once an up-front fee has been paid). In addition, investors are being encouraged to sell previously highly regarded 'blue chip' company shares, such as banks and financial institutions and to invest in green or new technology shares marketed by the boiler rooms, or even to take out loans to fund new investments.

These fraudsters are usually well spoken and knowledgeable. They are also persistent. They might call their victim several times with offers of research, discounts on stocks in small overseas companies, or shares in a firm that is about to float. Boiler rooms make their money in one of two ways: by simply taking money and walking away, or selling shares at vastly inflated prices and with exorbitant dealing charges.

Police advice is not to accept cold calls, however persistent. Always seek legal and independent financial advice.

The Fraud Advisory Panel (www.fraudadvisorypanel.org, opens in a new window) offers practical advice to consider before purchasing shares, Often, shares are offered in USA companies that have, or are about, to float on the stock market. These regularly prove to be 'Regulation S' (or Rule 144) shares, which can only be sold to non-US citizens and have other limitations. Any company offering shares in connection with the American stock exchanges should be checked at the US Securities & Exchange Commission (opens in a new window).

Scams often have similar features that may alert you to the fact that they are not genuine:

• if it sounds too good to be true then it probably is

• if you are asked for money up front to pay unexpected fees (such as taxes or charges) before your 'prize', 'winnings' or 'profits' can be released

• you are asked to provide your bank account, credit card details or other sensitive personal information

• you are put under pressure to reply immediately "or the money will be given to someone else "

• you are asked to keep the details secret

Please remember that any company, no matter in which country they are based, must be registered with the Financial Conduct Authority to offer shares for sale to people living in the UK.

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