More investors reported boiler room scams in 2011 than in 2010, according new figures from the Financial Services Authority (FSA). Despite the 5,401 complaints about share fraudsters - an increase of 19 per cent from 2010 - fewer people lost money.
It appears more investors are getting wise to boiler rooms, with a 7 per cent drop in 2011 (from 831 to 770) in the number of victims who were persuaded to part with money.
As the average investor loses approximately £20,000 to share fraudsters, the drop in the number of victims represents a significant amount of money.
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. Boiler rooms are unauthorised, overseas-based companies with bogus UK addresses and phone lines routed abroad.
Unauthorised companies are not covered by the Financial Services Compensation Scheme; therefore should somebody invest through one, it is highly likely they will lose their money if the company goes bust or (more likely ) just disappears.
According to the FSA, boiler rooms increasingly clone genuine authorised companies or individuals to appear more credible. In 2011 there were 449 reports made about a number of cloned companies - almost three times as many as the year before (161 reports).
If you receive an unsolicited call or e-mail from a company offering to buy or sell shares, the best thing is to put the phone down. If you really can't bring yourself to do this, the FSA recommends:
■ Ask for the contact details of the person calling you.
■ Check the company's or individual's status on the FSA register.
■ Check the FSA's 'warning list' to see if the company is a known boiler room.
■ Call the company back on the switchboard number provided on the FSA Register to make sure that the call came from the legitimate authorised company.
Anybody who has been contacted by a suspicious company should report the encounter as soon as possible by calling the FSA on 0845 606 1234 or using this online form.
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