‘Boiler room’ scam shut down; The majority of boiler room scams are targeted at men aged 65 and older who are active investors. On average, victims tend to lose about £20,000, which they are unlikely to recover

November 22, 2013 6:55 pm

‘Boiler room’ scam shut down

By Elaine Moore

A suspected boiler room scam has been closed in an unusual pre-emptive action by the financial regulator. On Tuesday, the Financial Conduct Authority (FCA) announced that it had frozen the global assets of First Capital Wealth, which is suspected of promoting and selling dubious investments without authorisation. First Capital Wealth has also been forbidden from selling investments after a High Court judge said that it posed a serious risk to consumers.At least 20 investors are thought to have put a total of £650,000 into Berkeley Brookes LLC, a vehicle promoted by First Capital for investing in emerging market property, between July and November this year.

Last year the Mirror newspaper published an article in which it questioned the sale of rare earth metal investments by First Capital Wealth, although this is not the cause of the FCA’s action.

All First Capital Wealth clients will receive a letter from the regulator, which has said it will do everything possible to recover money they have invested. However, as First Capital Wealth is itself unregulated, the FCA it has warned investors to remember that they are not covered by the Financial Services Compensation Scheme. FCW could not be reached for comment.

Boiler room scams are so-called because of the pressure put on investors by salesmen who cold call.

Many start with a call from someone promoting a seemingly attractive investment that is only available for a short period of time. The broker will then attempt to sell the investor worthless shares in a company at a high price. In some cases, the company the broker is promoting does not even exist.

Most schemes are operated from overseas but provide investors with a UK address. First Capital Wealth lists addresses in London, Hong Kong, Johannesburg and Abu Dhabi.

The majority of boiler room scams are targeted at men aged 65 and older who are active investors. On average, victims tend to lose about £20,000, which they are unlikely to recover.

Some victims of boiler room schemes can suffer a further loss if they are targeted by recovery firms, which falsely claim they can obtain reimbursement for an upfront fee.

In 2012 the regulator saw complaints about investment scams fall by almost a third compared to the previous year, to 525. However, it estimates that in spite of the drop, criminals are still conning £1m a month out of investors. This year, three UK citizenswere given long jail sentences by a US court

after being convicted of boiler room fraud.

The best way to avoid being the victim of a boiler room scam is to be wary of any investment scheme that sounds too good to be true, but there are a few other ways you can limit the chances of contact with a conman.

To find out whether the person calling is authorised by the FCA you can check the regulator’s Financial Services Register: fca.org.uk/register/ but be aware that some boiler room scams use the names of authorised firms to appear credible.

Another way to avoid attention is to keep your name and address out of the public domain. Criminals often obtain details of potential victims from the shareholder registers of listed companies, so you could choose not to hold shares directly. Alternatively you could opt out of the edited electoral register – meaning you can still vote, but your contact details will not be available for sale.

If you believe you may have been the victim of a boiler room scam contact the FCA online or by calling 0800 111 6768 or the UK’s national fraud reporting centre, Action Fraud.