Wednesday, 22 July 2009

Boiler Rooms.Essential Reading

You really need to be very careful if some person you never heard of before comes blazing out of no where offering to resell you an incredibly obtuse price for a type of share from an unknown company. There are a lot of high pressure sell scams to try and get you to buy various shares or part of a company in advance for some grand reward later.

So just what does a "Boiler Room Scam" entail?
These boiler room scams attempt to make cash by calling up some UK investors without prior notice and pressuring them to purchase their shares. However these shares usually end up being very difficult to sell once you purchase them and be worth a good deal less than you payed, making them very risky. You could end up with useless shares if you do purchase them. These scams usually come from over seas so you won't have a leg to stand on if you do wish to go back and seek legal action for being scammed.
United States 'Regulation S' shares are one brand of share that tends to be used a lot. These particular type of shares actually have a year long period that they can be sold after purchase and usually their worth has fallen incredibly.

So how do these work?
You will usually first hear of these scams through email or regular mail, or you might see them advertise online. They tend to trap you buy giving free research on the companies' shares that you hold, or maybe a gift or reduced fee for dealing with them.

If you do sign the form, there is a good chance you have agreed to be perused by them in the future. Usually this is in tiny print on the mail you received.
The address on the mail that seems to be from the UK can actually be a forwarding address from and overseas location.
Even the most bogus of web pages can look very impressive. Just because it's on the internet doesn't make it trust worthy. These boiler room scammers can be incredibly stern and will not take the answer of 'no'. They constant call their targets everyday till they finally sale something. They usually are very smooth talkers, use complex technical jargon, and great deals to fool you. They usually even have scripts to get you to to believe them or fend off uncomfortable questions, they are well trained to trick you. They will either use their charm or intense pressure to get you purchase something that will only disappoint you.

They will ask you to send cash for their share certificates once you offer to buy them. Most of the time you get certificates for shares that are near worthless compared to what you may have put cash up for. And a lot of the time the boiler room company who contacted you will simply up and disappear with your money never to be seen again.
There are even tricks where they try to convince you that you are already in contract with them and need to pay. This is not true at all. These contracts are not enforceable by UK law.

Other scams include the boiler room to offer you huge amounts of money for your existing shares, saying they are with a firm of a wealthy investor who is planning a takeover bid. Usually they want you to send them cash in advance in an "indemnity bond" or some other type, and they say the offer rests solely on this cash.

So how do I go about protecting myself.
If some random company comes to you from seemingly out of thin air you need to be careful. It is usually against the law if some one calls you out of the blue trying to get you to purchase shares or investments. You always need to do research to see if this firm is on the Register and able to give real financial advice before you give up your cash. Because if they end up not being regulated and something doesn't work out for you, you can't register a complaint or get any of your money back legally.

It's also best to remember that even if their name is on the Register, it doesn't mean they are that person. Some of these scammers usually use the names on the Register to trick you into believing that they are actually them. If you aren't expecting a firm to call you, and they do, just remember to be careful.