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MONEY COMMENT
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Who do you think is most at risk of investment scams? According to the Financial Services Authority, middle-aged professional men with considerable investing experience are the typical victims of a particular type of sting commonly known as a "boiler room" scam. Blimey, that sounds just like me! The FSA said 87% of the people who called its helpline between May and August after falling victim to a boiler-room scam were male. Additionally, two in five of those who lodged complaints had been investing for 10 years or more, and 30% were either professionals or directors. Boiler rooms are commonly used to describe sales offices equipped with banks of telephones that employ people who use high-pressure selling tactics. The origin of the term comes from a time when pushy telemarketers would rent cheap office space in the basement of buildings, which were both hot and uncomfortable, and often close to, or actually in, the boiler room. Today the term boiler room specifically refers to unregulated companies that peddle dodgy shares by providing false or misleading information. If you are ever contacted by a boiler room, here are a few things you should do. Hang Up the Phone Boiler room operators are very experienced in high-pressure selling techniques. These people can be very persistent and may even become aggressive and abusive if you dither over taking up their "generous" offers. Consequently, if you are easily swayed, then never try to engage in polite conversation but hang up the phone immediately. Ask For Information I have on several occasions been approached by boiler-room boys, and just out of curiosity requested more information about the companies they work for. Naturally, they promised to send me their brochure. However, that was some years ago, and I am still waiting for the brochure today! In reality there never were any brochures and boiler room operators are often very evasive about their business. Invest In What You Know Never invest in something you know nothing about. Remember that boiler-room operators are well-versed in making you feel utterly inadequate by your lack of knowledge about a particular company or "ground-breaking" product. However, bear in mind that you are more likely to be swindled the greater your degree of ignorance. Tell The Financial Services Authority If you are worried about the credentials of a company you can always contact the FSA on 0845 606 1234 first. The regulator will be able to tell you immediately if a firm is authorised. The regulator also has an online checking service for firms and persons. The FSA report clearly shows that even seasoned investor can fall victim to financial scams. However, I suspect these professional investors are more aware of their rights, which may explain why they have complained to the FSA. Unfortunately, even the FSA is powerless if scams are perpetrated by overseas companies. So, as ever the rule is "When in doubt – leave it out" and "If something sounds too good to be true, then it probably is"!