Financial watchdog warns of new appearance of old type of fraud

Financial watchdog warns of new appearance of old type of fraud
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The financial industry regulator Financial Services and Markets Authority, has issued a warning about an upsurge in a form of financial fraud consumers may fall victim to, known as boiler room fraud.

A boiler room usually refers to a call centre that cold-calls victims offering financial products of questionable legality. The term comes from the way such centres are usually organised, with a maximum of callers at desks arranged in rows in a small space.

The cold-callers use high-pressure sales techniques, as well as outright lies, to persuade victims to invest in a variety of products, from bonds to penny shares to an interest in French wine.

The products themselves are typically worthless, but if victims buy them, that can increase the value, helping convince the victim they have made a good investment – until the bubble bursts and the products become worthless again.

In the latest manifestation, the sellers are pushing shares in three companies: Bruckhaus Quist, Daltium en EMW Capital.

The above companies are not authorized to provide investment services in Belgium,” the FSMA warns on its website. “The FSMA therefore strongly advises against responding to any offer of financial services made by the companies listed above and against transferring money to any account number they might mention.”

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The authority warns against any offer that comes from cold-calling, and offers some more advice:

Be wary of unsolicited phone calls/emails (cold calling), that is, where no prior request has been made by the investor. Such calls are often indications of an attempt at fraud.

Be wary of requests to transfer money to a country without any connection to the company or to the state of which the investor is resident. Please note that in the case of boiler room fraud, requests to transfer money are made most often toward accounts opened with banks based in Asia.

Be wary of (promises of) completely disproportionate returns. Fraudsters frequently present significant earnings at the beginning, until the day when the investor asks to withdraw the funds invested.

Do not accept uncritically the information provided by such companies. It is not uncommon for a company to claim to be authorized to offer financial services although this is not the case. Be sure always to verify the information you are given.

Be wary as well of 'cloned firms': companies that pass themselves off as different, lawful companies even though they in fact have no connection with the latter. A close look at the email addresses or contact details for the companies in question may prove useful in order to detect potential fraud of this sort.

Ask your intermediary for clear and comprehensible information. Never invest if you do not understand precisely what is being offered.

Be all the more suspicious if the payout of returns is conditional on an additional payment and/or the payment of a tax. These additional demands are often the sign of fraud.”

The FSMA website offers a search function to allow checking of any company mentioned in the cold call. If in doubt, contact the authority directly.

Alan Hope

The Brussels Times

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