Beware of Dodgy Investment Promoters
By Nick Braun MSc PhD
A couple of months ago I got a call from a well-spoken gentleman who told me he was a broker promoting a hot new technology company. The company was supposed to excel at "biometrics" - the science of using eye retinas and voice recognition to identify people. Exciting stuff.
They were supposed to be gearing up for an initial public offering (IPO) and I was being offered a piece of the action. Lucky me.
While we were talking I did a quick "Google" of his brokerage's name. One of the first entries was a respected investment bulletin board and the advice was to steer clear from what was described in no uncertain terms as a "boiler room" scam.
A boiler room scam, for those that don't know, is an enterprise which is usually run out of low-rent offices (hence the term "boiler room") and uses high pressure sales tactics and false or misleading information to solicit investors.
That was the end of that. However, it got me thinking. How many poor investors had been duped that day? How many would be duped in the weeks ahead?
So I made a lengthy call to the Financial Services Authority and gave them all the details. They said they'd look into it. They've now listed the brokerage on their website as one of a number of "unauthorised overseas firms known to be targeting UK investors".
However, that's all they've done. The websites of the phoney biometrics company and the phoney brokerage are still up and running and, as far as I can see, they're still taking "investors" credit card details.
According to an FSA press officer it's not their policy or within their power to chase financial fraudsters of this nature. Their main priority is "raising consumer awareness". Sounds like a bit of a cop out to me, although, to be fair, criminals like this are ten a penny and based all over the world. However, I reckon the FSA spends too much time making life difficult for honest IFAs and the like, while dangerous fraudsters get off scot-free.
To help protect against financal scams, we've decided to provide the following checklist that will help you spot a boiler room operation within minutes:
BOILER ROOM CHECKLIST
1. When was the company registered? If you go to a website such as www.oswalds.co.uk, who offer a company search service, you can type in the name and see when the company was established. In this case the company was formed on March 3 this year, only weeks prior to me being contacted. I find it hard to believe that a company could be set up, develop a range of high-tech products and prepare for an IPO in the space of two months!
2. When was the web address registered?
For .com domains go to:
http://www.networksolutions.com/en_US/whois/index.jhtml
For .co.uk domains go to:
Type in the web address and you'll see when the domain name was first registered. In my case the phoney biometrics company's web address was registered on March 16. This is the exact same day the web address of the phoney brokerage firm promoting the company was registered. Now isn't that a coincidence?
3. Where are their offices? Most websites have a "Contact Us" page. In this case the biometrics company had impressive looking offices in London, Hong Kong and Washington. However, type part of these addresses into Google and you immediately find out that these are real but serviced offices which offer personalised telephone answering, ie a perfect cover. Let's face it, how many big tech companies run out of three serviced offices?
4. Who are the company's partners? A lot of websites list other prestigious companies as business partners to gain reflected glory. In this case the phoney tech company listed the likes of Panasonic and others. I contacted one of these, a genuine retina recognition company in New Jersey, and they said they'd never heard of the phoney tech company and were furious about being linked with a scam.
5. Who are the company's directors? Copy and paste their names into Google and see what comes up. In my case I couldn't find any relevant information about people who were supposed to be leaders in their field, ie they don't exist.
6. Have they been lazy? It's easy enough to put together even a sophisticated and convincing looking website. However, most scammers couldn't be bothered writing page after page of product and company information. So they simply lift it from someone else's website. In this case whole sections of the website had been lifted from an official biometrics website - biometrics.org.
7. Is their site secure? If the scammers are asking you to provide credit card details there's a good chance they won't be doing so in a secure environment. A web page is generally secure if it contains a little yellow padlock somewhere on the page, usually in the bottom right hand corner.
8. Finally and most importantly never give your money to someone who calls you up out of the blue!
Click here to browse our unique tax saving guides
