Share Scams

It may sound obvious, but if a stranger rings you out of the blue and tries to get you to buy shares in a company that you have never heard of - take great care. This could very well be part of a financial scam using hard-sell tactics to persuade you to buy shares.

If you buy the shares, you may be left with potentially worthless shares. You may also have no rights to complain or to any compensation arrangements as most of these share scam operators are based overseas and, as you may imagine, they are not regulated.

These types of share-selling schemes that operate by using highly persuasive, unsolicited telephone calls are also known as boiler rooms.

The first time you hear from one of these firms could also be by post or email, or they might advertise their services over the internet. They may offer you a free research report into a company in which you do hold shares or a discount on their dealing charges.

If you have been contacted by an unauthorised overseas firm in this way, please contact either your local financial services regulator or the police and provide them with information on your dealings with the firm.

Other share scams
If you already own shares in a company, you may receive a call from someone offering to buy your shares usually at a higher price than their market value. If the price of the shares that you own is currently quite low the offer may sound quite attractive to you.

They will also ask you to pay something up front, as a form of pledge or security, which they say that you will get back if the sale does not go ahead. They may also ask you to sign a form preventing you from disclosing details of the offer.

Don't be fooled by such an approach. It is probably a type of advance fee scam, where you give them your money and will never hear back from them again.

The people that contact you can be very persistent phoning you many times and not taking no for an answer, even sending you documents or forms to complete although you have refused their offer.

Protect yourself
Always make sure that any firms that you use to buy or sell shares are regulated and are permitted to give financial advice before you hand over any money.

If a firm is not regulated and things go wrong, you will not have access to complaints procedures or any compensation arrangements that may exist.

Some callers may even use the names of firms that are regulated to make you think that they are legitimate. It is unusual for firms to call you out of the blue, so do be wary if you are not expecting a call.
If you are in any doubt:

  • ask for the contact details of the person that is calling you; and
  • check their identity directly with the firm that they claim to work and also check the financial services regulator’s website to see if they are regulated.

Don’t listen to any excuses - if the call is genuine a trustworthy firm will not mind you being careful.

Financial services regulators regularly make public statements and issue warnings about firms that operate in this way and that may be carrying out boiler room type scams or other forms of illegal or unathorised activity.

Remember that these types of firm are likely to change their name frequently.

Default Sidebar image