The FSA cracks a boiler room master list of 1,000 targets.
Getting hold of lists of verified contact details is big marketing business these days, especially if they're carefully targeted. Many companies legitimately buy and sell such contact lists, and use them to great effect to sell their wares.
But just think how much damage could be done by crooks using such lists for nefarious purposes? That's one of the things the Financial Services Authority (FSA) keeps an eye on, and this week it announced it has got hold of a list of potential dupes being used by so-called boiler rooms.
Scammers
Boiler rooms are outfits, operating illegally, who call you and try to sell you worthless shares. They might be over-hyped, deliberately ramped, or for some other reason unsaleable and worth little. And they frequently share lists of people likely to fall for their scams -- those who have been scammed before, others who seem open to the cold-sell approach, and people generally thought to be vulnerable to a smooth-talking salesman.
The FSA, together worth the City of London Police, has contacted the people on the latest list, warning them of their potential victim status and advising them how to avoid fraud. This list is the second the FSA has uncovered this year, and it appears to be still in use, so this timely action has probably prevented quite a few people being parted from their hard-earned cash by fraudsters.
Fighting back
This comes after an earlier letter sent out by the FSA and the police in February, which is well worth reading for some sound advice. (It's a PDF file, so it should open if you have Adobe Acrobat or another PDF reader installed).
As well as sending warnings and advice, the FSA is actively on the trail of boiler room operatives, and just last month recovered £270,000 from a number of companies that had been involved in share fraud. This scam used the common tactic of calling potential victims from overseas, where a lot of boiler rooms are based and where the FSA can't touch them. In this case, the FSA's success came though trapping individuals based in the UK who were suspected of being involved in the operations of the overseas crooks.
Second bite
Victims may be surprised to learn that, having been scammed once by a boiler room, their details are still of interest to others -- presumably they're not going to fall for it twice. But there is a very common two-part scam that can con you a second time.
Having been scalped once, losing a chunk of money buying shares that turned out to be unsaleable, some investors think they have a golden opportunity to salvage something from the wreckage when they are contacted again, often a few months after the initial rip-off, by someone offering to buy the shares back from them.
It might genuinely be a different company, telling you your shares have risen in price, and that they have a customer who's keen to acquire them. They will most likely have obtained your details from one of these lists, and already have the details of the original scam you were stung by.
But if they are offering you money, where's the catch? Well, they'll tell you that as the shares aren't openly traded -- they're "restricted" in some way -- there's an upfront fee to pay to derestrict them so they can be sold. Of course, if you pay the fee, you'll never hear from them again. If there really was a genuine fee to be paid, any reputable broker would take it out of the proceeds and wouldn't ask you to pay up front.
What should you do?
The simplest advice is to remember that old saw -- if it sounds too good to be true, then it probably is. People just don't call you out of the blue to offer you a sure-fire profit -- if it was that certain, they'd be taking the cake for themselves rather than offering you a slice.
If you get a cold-call trying to sell you anything, just hanging up is the simplest way to deal with it.
But selling shares this way is illegal, so if you're feeling public-spirited, you might like to get their details, check with the FSA register to check them out, and report them to the FSA if they look dodgy.
Oh, and pass on any warnings, or ask questions if you aren't sure, on our "A fool And His Money" discussion board.
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