Find out how share fraud works, how to spot and avoid boiler rooms and what to do if you are scammed.
Share scams are often run from ‘boiler rooms’ where fraudsters cold-call investors offering them worthless, overpriced or even non-existent shares. While they promise high returns, those who invest usually end up losing their money.
Boiler rooms use increasingly sophisticated tactics to approach investors offering to buy or sell shares in a way that they say will give investors a huge return. But in the end, victims are often left out of pocket – sometimes losing all of their savings or even their family home.
We have found that victims of share fraud lose an average of £20,000 to these scams, with as much as £200m being lost in the UK each year. Even seasoned investors have been caught out, with the biggest individual loss recorded by the police being £6m.
How share fraud and boiler rooms work
Share fraud usually comes out of the blue, with scammers cold-calling investors after taking their phone number from publicly available shareholder lists. But the high-pressure sales tactics can also come by email, post, word of mouth or at a seminar.
These scams are sometimes advertised in newspapers, magazines or online as genuine investment opportunities. They may even offer a free research report into a company in which you hold shares, or a free gift or discount on their dealing charges.
You will often be told that you need to make a quick decision or miss out on the deal.
The scammers might also try to sell you shares in a company you have never heard of, often because it does not exist. If you buy these shares, it is likely you will be left with a worthless investment.
Remember: if it sounds too good to be true, it probably is!
We strongly advise you to only deal with financial services firms that are authorised by us, and check the Register to ensure they are. Keep in mind that authorised firms are unlikely to contact you out of the blue with an offer to buy or sell shares.
Find out the steps you should take to protect yourself from share fraud and how to stay safe from more investment scams.
If you have been scammed
We receive almost 5,000 calls a year from people who think they are victims of share fraud. Unfortunately about 10% of these people have already paid money to the criminals, down from about 60% a few years ago.
It takes an average of about four calls from the scammers before people contact us, but the sooner you do the less likely you are to lose your money.
You can report the firm or scam to us by contacting our Consumer Helpline on 0800 111 6768 or using our reporting form. Please provide as much information as you can about your investment and the company involved, including their contact details and ’firm reference number’ (FRN).
If you have already bought or sold shares through a boiler room, be especially careful as fraudsters are likely to target you again or sell your details to other criminals. The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or buy back the shares after you pay an administration fee.
More on other share scams
If you already own shares in a company you may receive a call from someone offering to buy them, usually at a higher price than their market value.
This might sound like a great deal, but will likely come with a request for money up front as a bond or other form of security, which the scammers say they will pay back if the sale does not go ahead. This is probably a scam where you pay money upfront but never hear from them again.
Find out more about upfront payment scams.