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FSA/PN/034/2010
24 February 2010

The Financial Services Authority (FSA) has issued a warning following the dramatic increase in overseas fraudsters selling shares using the names, registration numbers and addresses of FSA authorised firms and individuals.

The FSA has noticed a significant rise in this type of fraud, with crooks imitating genuine authorised firms to try and convince consumers of their legitimacy. 

Recently the FSA has seen instances where an authorised firm’s website has been cloned but with a few subtle changes, such as a different phone number or false email addresses.

Should anybody receive an unsolicited call or email from a firm which they are not a customer of, the FSA is recommending that people should take the following steps:

• ask for the contact details of the person calling you;
• check the firm or individual’s status on the FSA register;
• call the firm back on the switchboard number provided on the FSA register to make sure that the call came from the legitimate authorised firm.

Anybody who has been contacted by a suspicious firm or has any doubts should report the encounter as soon as possible by calling the FSA on 0300 500 5000 or reporting it online.

Consumers also need to be aware that firms not registered with the FSA are not covered by the Financial Services Compensation Scheme. This means that should somebody invest through an unauthorised business, it is very likely they will lose their money if the firm goes bust or disappears.

Jonathan Phelan, head of the FSA’s unauthorised business department, says:

“It is encouraging that awareness of share scams is now so high that conmen are having to come up with new tactics as it shows our strategy is working. Sadly, however, this also means there is a renewed risk to investors and a new type of scam for us to tackle.

“Our message remains the same: never deal with unauthorised firms. If somebody calls you out of the blue to promote shares, then you should be very wary of them even if they claim to be authorised by the FSA.  If in doubt, make a report to the FSA; the more information we receive on a firm, the better placed we are to shut them down.”

Share fraudsters, commonly known as ‘boiler rooms’, usually contact people by telephone and use high pressure sales tactics to con investors into buying non-tradable, overpriced or even non-existent shares.  Boiler rooms are unauthorised, overseas-based companies with bogus UK addresses and phone lines routed abroad. 

Notes for editors

1. Significant rise is attributed to the number of enquiries received by FSA: Between January and October 2009, the FSA received three enquiries regarding this type of fraud; since the beginning of November 2009 there have been 29.
2. The FSA recently sent letters to 10,000 investors warning them of their presence on a list used by fraudsters to target people with worthless shares.
3. Share fraud is estimated by the FSA to cost the UK around £200m a year.  Last year the FSA received calls from over 3,100 people who had been contacted by boiler rooms.  Of these, 734 had become victims, losing an average of £24,000 each.  Based on these figures, total losses reported are about £17m annually.  The FSA and the Police believe that only about 10% of victims report this type of crime.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.