People who fall victim to boiler room scams by purchasing virtually worthless shares lose an average of £20,000, according to the Financial Services Authority (FSA).
The warning comes after the FSA surveyed callers to its consumer contact centre who had reported being targeted by boiler rooms – overseas operations using high-pressure selling techniques to persuade UK investors to buy shares.
More than half (59%) of the 100 respondents to the survey had fallen victim to the scam by purchasing worthless shares and, of the victims, 13% had been conned by more than one boiler room.
While the average loss was £20,000, three victims each reported losses of over £100,000.
The survey found boiler rooms tend to prey on older people, with 38% of the victims being aged over 60 and 26% aged 51-60 years.
The majority of victims were male (81%) and most were experienced investors with 41% of victims saying they had been investing for over 11 years.
Geographically, most victims were from London or the South East, while Wales and the South West had the least victims.
Many respondents reported the boiler room repeatedly called them to encourage them to invest. While 15% of victims were persuaded to purchase shares during their first call, nearly half (49%) of victims were called four or more times before they succumbed.
Regardless of whether they purchased shares or not, 63% of respondents reported they were pursued by the boiler room for at least one month and nearly a quarter (23%) said they were receiving calls from the same boiler room for more than six months.
Jonathan Phelan, head of retail enforcement at the FSA, says: “Sadly, victims are unlikely to see their money again because their shares will have been overpriced and nearly impossible to sell. Boiler rooms are not authorised by the FSA and are based abroad outside our reach, so victims are not protected by the financial services compensation and complaints schemes.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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