The Financial Services Authority (FSA) and the Institute of Chartered Secretaries and Administrators (ICSA) Registrars Group are urging UK listed companies to help protect their shareholders from boiler rooms by sending them warnings about the scam.
‘Boiler rooms’ are high pressure sales firms, often based overseas, that target investors illegally, offering them non-tradable, overpriced or even non-existent shares. Boiler rooms usually target existing shareholders by legally obtaining a company’s list of shareholders.
To help protect people from these scams, the FSA and ICSA have produced an updated version of a free leaflet with warnings about boiler rooms, for listed companies to send to their shareholders. The leaflet, which was first published in 2006, provides useful information on how to identify a boiler room and what to do when they contact you. The FSA, with the assistance of share registrars, is also writing to individual listed companies to encourage them to send out the leaflets.
Shareholders and other consumers can avoid becoming victims of boiler room fraud by:
Checking that anyone offering to sell them shares is authorised by the FSA
Reporting any company that cold calls them to sell shares to the FSA
Hanging up the telephone if the caller persists
“Boiler rooms remain a significant problem in the UK and people lose a shocking amount of money to these scams every year,” says Jonathan Phelan, head of retail enforcement, FSA. “Shareholders are targeted heavily in these scams and raising awareness is the most effective way of putting these companies out of business. It is in everyone’s interest to ensure that people only deal with authorised brokers when buying shares. Investors who deal with an authorised firm have the protection of the complaint and compensation schemes if something goes wrong.”
“The ICSA, its associated registrars, and many listed companies have made sustained efforts to make sure shareholders understand the risks that boiler rooms present,” says Andy Cotter, chairman of the ICSA’s registrars group. “No company wants its register used to target unsuspecting shareholders with high pressure sales offers which is why I am confident that businesses will help by passing on the advice to their shareholders, either via postal mailings or online.”
Companies, registrars and FSA regulated firms can send the free leaflets to their shareholders and customers with other regular communications or by making it available on their own websites. An electronic copy of the leaflet is also available on the FSA and ICSA’s websites.