Over £1 million has been recovered for victims of an illegal boiler room scam.
The cash has been reunited with 153 investors who lost money after they were illegally sold shares by unauthorised overseas investment firms.
The money was recovered following an investigation of two North American-based companies, Rocky Mountain Gold Mining Corporation and Rocky Mountain Gold Mining, by the Financial Services Authority.
It found that UK investors had sent about £1.25 million to North America where Rocky Mountain's operations were based. Working with Canadian regulators, the FSA managed to freeze the funds investors had sent over and paved the way for investors to receive refunds. The money recovered represents about 90% of the cash sent over by UK investors, but the FSA says more money might be refunded in the future.
Jonathan Phelan, head of department in the FSA's enforcement division, said: "This is a rare bit of good news for investors who have been persuaded to hand over money to boiler rooms as usually the money disappears without a trace."
If you bought shares in either Rocky Mountain Gold Mining Corporation and Rocky Mountain Gold Mining then you could be entitled to a refund. Although the FSA says it has tried to contact all known investors, it says some may still be unaware that the money has been recovered.
You can contact the FSA on 0845 606 1234 to find out if you are entitled to a refund.
Boiler room operations
According to scams expert Tony Hetherington, boiler rooms work byencouraging you to buy virtually worthless shares that are not tradedor unlikely to ever trade on any stockmarket in the world.
If you are contacted by boiler rooms then the FSA's advice is to hang up the phone as in most cases these investments are scams that will see your money lost forever.
But the problem is many boiler rooms use convincing sales pitches to woo investors, who don’t realize they are being scammed until it is too late.
However, there are some tell-tale signs you should watch out for.
A cold-call from any company offering shares should always be avoided. This is not a normal selling tactic and nearly always indicates that things are not all they seem. It is also illegal for UK investment firms to cold-call potential customers.
Most boiler rooms are based abroad, where they are outside the remit of the FSA. If you are unsure whether a firm is UK-based or not then a simple check on the FSA’s register should clear things up.
If the firm is not registered with the FSA, or does not have the authority to sell shares and investments, then do not touch them with a barge pole. Non-FSA registered firms are not covered by the Financial Services Compensation Scheme and even though some investors do manage to get their money back, most do not.
Even if you are satisfied that the firm is properly regulated, then double check the sales person who contacted you actually works there. Boiler rooms have been known to use fake company names in order to convince investors to part with their cash.
Ignore any exciting claims the boiler room makes about these shares – they are nearly always too good to be true.
If you are still unsure whether to trust a sales pitch then contact the FSA on 0845 606 1234 to get a list of all known boiler room scams.
Have you been the victim of a boiler room scam, or are you concerned about a firm that has contacted you? Share your experiences in the Moneywise forums.