There are many different types of investment fraud which can cause substantial financial damage and hardship to those individuals who have been caught up in them. One of the more common ways of swindling people out of their hard-earned savings is a boiler room fraud.
How does a boiler room fraud unfold?
Con-artists, scammers, fraudsters – whatever you want to call them – boiler room frauds are carried out by credible but devious individuals who tend to be very good at what they do.
They appear to have this ability to tap in to the human psyche and bring out our worst traits. They prey on our financial fears and insecurities. They understand all too well the politics of greed and envy and how that can be exploited.
They will lure you in with opportunities to invest in cutting-edge products, innovative technologies and that steadfast classic – bricks and mortar, usually in an exotic overseas location.
They will sell you shares in non-existent, disruptive tech companies. They will direct you to a fake website as evidence of the company’s existence which contains a backstory setting out the exciting potential of all its products.
They will tell you they are authorised and regulated by the Financial Conduct Authority. They may even use the name of a genuine firm of financial advisers. They are experts in pretending to be someone they are not.
They will tell you about their glowing track record of out performance and supply fake, glossy brochures to ‘prove’ it.
They will call their investment products mini-bonds, corporate bonds, fixed rate bonds and claim that they are structured as tax-efficient ISA wrappers approved by HMRC.
They make so many false claims, it’s boring; but they know which buttons to push, they know the jargon; and time and again we fall victim to these scammers and their boiler room frauds.
Boiler room sales techniques
The first line of defence for investors against any scam is to be alert to the boiler room sales techniques employed by fraudsters. These are carefully scripted and usually follow the same pattern.
Using a combination of charm, bullying and outright lying, these fraudsters will pressurise retail investors into buying shares, bonds or property with promises of unusually high returns.
The initial approach can take many different forms: a cold-call, an email, a letter in the post, an advert in newspaper or magazine, word of mouth and increasingly, online through various social media platforms.
It could even be the offer of a free fake research report on the target tech company that can be downloaded in exchange for an email address.
Once a potential investor’s interest has been piqued by what appears to be a genuine investment opportunity, the high-pressure selling commences.
How to deal with boiler room frauds
Always avoid unsolicited cold calls and be prepared to hang up on the caller. If you do find yourself drawn in to a conversation, do not under any circumstances reveal any personal financial details.
The Financial Conduct Authority (FCA), the organisation responsible for regulating the UK financial services industry, maintains a register of known scams and unauthorised companies. This is updated as new frauds emerge and the warning list can be checked here.
For practical advice on how to deal with a potential investment scammer, please click here.
If you believe you have been scammed then please report it on the FCA’s consumer helpline 0800 111 6768 or use their contact form.
