The Typical Boiler Room Victim

If you are male, over sixty years of age, live in London or the South East, and have some experience in investing then you are a likely target for boiler rooms.

The term 'boiler room' originates from a time when pushy telemarketers would rent cheap office space in the basement of buildings. These offices were often close to, or actually in, the room where boilers were situated -- hence their name. But today, a boiler room is a general term that refers to unregulated companies that use high-pressure selling tactics to flog dubious shares by providing false or misleading information.

As it turns out, I fulfil only three of the four criteria identified by the Financial Services Authority (FSA) as someone who may be a boiler-room target. But that doesn't mean I can ever afford to let my guard down. In fact, I was contacted by several boiler rooms more than twenty years ago when I was relatively new to investing, lived in Wiltshire, and on the right side of thirty.

Thing to always bear in mind is that boiler room operators are very good at what they do -- persuade! According to the FSA 15% of victims were swayed to buy shares during their first call. And nearly half of the victims succumbed after they were called four or more times!

The FSA point out that boiler room salesmen often won't take 'no' for an answer. They will constantly call a target, trying to build a relationship and get their confidence. They will appear knowledgeable and highly professional but they are only interested in taking your money. Additionally regardless of whether they purchased shares, six out of ten targets were pursued for at least a month, and nearly a quarter said they were receiving calls from the same boiler room for more than half a year. That's enough to wear most people down.

Truth is the shares that boiler rooms promote are worthless. In some cases the investments aren't even listed so you will never be able to sell them after you buy them. But what is even more distressing is that many victims have parted with huge sums of money, and the average loss is around £20,000.

So, if you ever get a call out of the blue to buy shares, be very wary. Check with the FSA as to whether the firm is authorised, and remember they are powerless if you deal with an unauthorised firm. And if you are in any doubt, just hang up. There's a time and place to be polite and courteous, but this is not one of them.

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