It’s common knowledge that it’s best to use a financial adviser who is regulated by the FSA. The effect that regulation has on the markets is hotly debated by the financial institutions themselves, but from a consumer’s point of view the FSA guarantees a fair service – or at least that someone will take notice of your complaints if you do not receive it.
But do you ever check up on your adviser’s regulated status? The FSA have recently issued a warning about a sharp increase in overseas fraudsters who imitate bona fide regulated firms, selling bogus shares and scamming millions out of British expats and UK citizens alike.
These thieves are not your common garden crook. Rather, they are sophisticated fraudsters who have considered every detail of their malevolent operation. By cloning the websites of legitimate firms, the fraudsters trick investors into assuming that they are who they say they are. Only tiny changes are made to telephone and email details, so when the unsuspecting investor contacts the bogus adviser, they reach the fraudster instead of the regulated broker or adviser.
According to the FSA, the most common type of scam is the “boiler room” scam, where salespeople telephone investors out of the blue and pressure them to buy shares that turn out to be worthless. Although the FSA states that such share fraud costs the UK £200million a year, it is apparently something that often goes unreported: the police estimate that only 10% of people who have been affected contact the authorities. Perhaps victims are embarrassed about admitting that they were taken in, as there is a stigma attached to being targeted by a conman.
So what can investors do if they smell a rat? The FSA warn that anyone who contacts you out of the blue and offers to sell you shares is suspicious, and should be reported to them. This seems a little over cautious, but presumably any legitimate firm has nothing to fear. You can also check that the telephone number and address details that you have been given on the internet correspond with the genuine broker’s details that are registered on the FSA website.
Regarding the advice that you actually receive, a genuine adviser should be happy to answer as many questions as you like about the shares or products on offer. And it seems that the old adage stands firm: if something appears too good to be true, it probably is.
