The Warning to Shareholders set out below is based on a warning produced by the Institute of Chartered Secretaries and Administrators and endorsed by the UK Financial Services Authority. It was produced to raise awareness of a fraudulent practice known as boiler-room investment scams, so called to describe high pressure phone sales operations. These are often based overseas and target investors with the promise of high returns on an investment, by offering them non-tradeable, overpriced or even non-existent shares in fictional companies. They may also offer unsolicited information in the form of a newsletter or company profile report as a hook to reel in the unsuspecting.
These operators acquire shareholder lists legitimately using data supplied by law under the Companies Act or from other sources. The Companies Act (2006) will introduce greater protection for shareholders with tighter rules on access to company registers, including a new offence of abuse of the register and proposed changes to the requirements for shareholders details to be disclosed. However, it will do little to protect investors whose names and contact details are already in circulation amongst the boiler room operators.
Warning to Shareholders
Over the last year many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas ‘brokers’ who target shareholders offering to sell them what often turn out to be worthless or high risk shares generally in US or UK investments. They can be very persistent and extremely persuasive and a 2006 survey by the UK Financial Services Authority (FSA) reported that the average amount lost by investors is around £20,000 (€28,000). It is not just the novice investor that has been duped in this way; many of the victims have been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.
If you receive any unsolicited investment advice:
- Make sure you get the correct name of the person and organisation.
- Check that they are properly authorised (for example, in the UK by the FSA) before getting involved. You can check by visiting www.fsa.gov.uk/register
- The UK FSA also maintains on its website a list of unauthorised overseas firms who are targeting, or have targeted, UK investors and any approach from such organisations should be reported to the FSA either by calling 0845 606 1234 or visiting www.moneymadeclear.fsa.gov.uk
- Inform our registrars on 0818 300 999 for shareholders resident in Ireland or +44 (0)870 702 0198 for all other shareholders.
- If calls persist, hang up
If you deal with an unauthorised firm, you would not be eligible to receive payment under the Financial Services Compensation Scheme. The FSA can be contacted by completing an online form at www.fsa.gov.uk/pages/doing/regulated/law/alerts/overseas.shtml
Details of any sharedealing facilities that the company endorses will be included in company mailings.
More detailed information on this or similar activity can be found on the FSA website www.moneymadeclear.fsa.gov.uk