Frequently Asked Questions - Boiler Room Scams

Boiler Rooms are operations, usually based outside the UK, set up specifically to defraud unsuspecting individuals and often involving very large sums of money. As these operations are based outside the UK, the perpetrators are able to target investors worldwide, and beyond the scope of the Financial Services Authority and Financial Services Compensation Scheme in the UK. Therefore it is almost impossible to recover any money that is lost.

Boiler Room scams operate according to at least three different formats. One format offers investors a “fantastic deal” on shares that are sure to double. The reality is that the company may not even exist. The second format is a proposition for the individual to buy or sell shares in a company they may already hold. The Boiler Room will tell one group of investors to buy and another group of investors to sell. If shares go up in value then the buyers will be impressed. If the shares go down in value then the party selling will be impressed, regardless of the share price. The perpetrator does this several times to gain the investor’s confidence before moving in for the big money investments - normally in companies which may be worthless or non existent. The third format is when the perpetrator plays the “white knight”, and involves investors who have lost money. The perpetrator tells them they have a buyer for their worthless holding, but a payment fee must be paid.

If you are a victim of a Boiler Room scam, it should be reported to the police and the Financial Services Authority. You should keep any documentation you have relating to the company making the recommendations in order to assist tracing the perpetrators.