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Investment scams

Investment scams are designed to look and sound like genuine investments. It is not just the novice investor who can be duped; even the most experienced of investors are vulnerable to a fraudster's tactics.

Investment scams can take many forms but they will all usually present themselves in a very similar fashion.

Typically you will be telephoned out of the blue, by a stranger, attempting to sell shares in a company you have either never heard of or from a stranger purporting to be an employee of a well known firm. Alternatively, you may receive an offer of a free, independent research report, outlining future prospects of a company, through the post.

The phone call or information you receive will undoubtedly offer you a great deal on shares along with the prospect of significant returns. However, after buying the shares, you may have difficulty in getting the shares or their certificates. When you try to sell the shares it is more than likely they will be untradeable or will be worth much less than you paid for them. Often the fraudsters behind the scam will simply take the money and run without even going through the pretense of sending certificates. This type of investment scam is often referred to as boiler room fraud.

Investors who have previously been the victim of an investment scam are sometimes targeted again by fraudsters who offer a service for a fee, to trace or recover lost investments. This type of fraud is commonly known as recovery fraud.

Another common scam is known as advanced fee fraud which involves a fraudster offering to buy shares that you own at an inflated price. To go ahead with the deal you will be asked for an up-front fee. You can rest assured that in all cases the fraudster will make off with your money, never to be heard of again.

How do I protect myself?

  • Treat cold calls with extreme caution

Regulated firms are NOT permitted to cold call clients. If you receive unsolicited calls you should treat them with extreme caution. Politely end the call or hang up. We do not advise that you encourage contact in any way. Independently get a contact number for the firm if you wish to call them back. The FCA publishes contact numbers for all authorised firms on its Register.

  • Check the Financial Conduct Authority (FCA) Warning List

The FCA publishes a list of unauthorised firms to avoid. This list is maintained to show the firms and individuals currently targeting UK investors which the FCA has received complaints about.

  • Research the firm

Always check whether the firm is authorised in the UK. This can be done by checking the FCA Register or by contacting the FCA Consumer Helpline on 0845 606 1234.

If the company is not authorised in the UK, then look carefully to see where the company is registered. It is worth checking whether the company is, in fact, regulated in its home country. If it is, try to find out as much as possible about how regulation works there.

Remember, if a firm is not authorised or the product unregulated then the usual protections for investors in a financial firm regulated in the UK, such as the Financial Ombudsman Service and the Financial Services Compensation Scheme, will not apply. Do not part with any money unless you are sure what you are investing in.

Remember if it sounds too good to be true, it probably is.