The FSA today warned of a new tactic used by boiler rooms to con both investors and UK small businesses out of their money.
Boiler rooms use high-pressure selling techniques to persuade UK investors to purchase shares in companies that are usually based overseas. Boiler rooms are not authorised by the FSA and act illegally by selling and promoting the sale of shares in the UK. In the majority of cases, the shares being sold are worthless and the boiler room vanishes, leaving the investor out of pocket. But the FSA is aware of a new trend where some boiler rooms are selling shares in companies based in the UK.
In some circumstances, the investor can demand a refund from the UK company, which may then be required to pay back the full price of the shares sold, even though it only received a percentage of the takings.
David Mayhew, acting director of enforcement at the FSA, said: “This is a new money-making scam by boiler rooms. It is particularly worrying, not only because investors are being enticed to pay over the odds for the shares but the UK company whose shares are being sold by a boiler room could potentially face financial losses and damage to its reputation. “