Warning to public over worthless shares scam

MORE than 38,000 people who could be targeted by fraudsters trying to sell worthless shares are being contacted by the City watchdog.

The Financial Services Authority (FSA) has recovered a master-list used by criminals involved in so-called boiler room scams.

These involve fraudsters using high-pressure sales tactics to con investors into buying non-tradable, overpriced or even non-existent shares. They are thought to cost the UK about 200 million a year.

The regulator said the list, which contains 38,242 names and addresses, was the biggest it had ever recovered. It believes it is still being actively used by boiler rooms in the UK and abroad.

The FSA is now writing to everyone whose name is on the list, alerting them to the situation and giving them advice on how they can avoid falling for the scam.

The firms selling the shares are not regulated by the FSA, meaning consumers do not have access to the Financial Ombudsman Service and Financial Services Compensation Scheme if things go wrong.

The FSA received calls from more than 3,100 people who had been contacted by boiler rooms during 2009, 734 of whom had become victims, losing an average of 24,000 each.

Jonathan Phelan, head of the unauthorised business department at the FSA, said: "This is the biggest list we've ever recovered and, by acting quickly and contacting every single person on it, we're hoping we can stop people losing money.

"Boiler-room fraudsters often sound professional so it's easy to be drawn in by their overblown claims and give them money to invest. The reality is, however, that the shares are worthless or don't exist and the money is lost forever.

"Cold calling to sell shares is rarely allowed, so anybody who receives a call like this should be extremely sceptical."