How to avoid boiler room scams and share rip-offs

Holly Thomas / 12 January 2016

Last year, more than 5,000 investors lost £1.73 billion through boiler room scams. What are they and how can you avoid them?

If it’s sounds too good to be true, then it probably is.

Sadly many people forget this age-old saying and fall victim to toxic scams known as boiler room schemes.

They promise investors incredible returns – but deliver absolutely nothing.

Could you be sitting on a fortune?

This kind of fraud is on the up. More than 5,000 investors lost a combined £1.73 billion through boiler room schemes reported to the Action Fraud crime prevention centre last year. These figures suggest that, on average, each scheme makes £1.25 million.

There are fears that many more will be conned by tricksters following the introduction of the new pension freedoms, which enable most people aged 55 and over to access their pension savings, since they will suddenly have access to their cash.

In addition, low interest rates on savings accounts are tempting more people to take on extra risk which means they could get caught out if they are new to investing.

Read Annie Shaw's guide to common investment mistakes.

What is a boiler room scam?

A slick, professional sounding stockbroker will call out of the blue and you will usually be asked to invest in shares in a company you have never heard of or perhaps even in land overseas. 

The returns will be wildly high at around 40% and you will most likely be told this is rare opportunity that you “don’t want to miss”.

These fraudsters play on investors’ desire to get into a market early while there’s still big money to be made, and can flatter their victims that they are smart and ahead of the game in recognising the opportunity.

Fraudsters aim to make their business seem legitimate, so they will often use technical jargon, impressive job titles and mock websites to appear credible. Read our jargon buster here.

Once they reel in their victims, they get them to agree to transfer money to them, which is never seen again. Often sums handed over are in excess of £50,000.

While most companies that sell investments in the UK are authorised by the Financial Conduct Authority by law. Boiler rooms, are not. This means that victims don’t have the rights of redress that clients of listed firms do.

Many people are targeted because the fraudsters know they have bought shares in the past and have the money to do so again.

Read our guide to spotting a scam email.

Six steps to protect yourself

  • Hang up if you are cold-called about a supposed investment opportunity.

  • Do not make a snap decision. A con artist will try to pressurize you into making a speedy decision so that you do not “miss out”. Any genuine offer would allow you plenty of time to make an informed decision.

  • Never assume investments are genuine just because the company offering them is based in a well-known location.

  • Be wary of unusual investments, such as carbon credits, rare earth metals and overseas land.

  • Deal only with companies that are authorised by the Financial Conduct Authority (FCA). You can check by calling 0800 111 6768 or online at

  • Use the FCA’s online checker at warninglist to help you see if an investment is above board.

If you’re considering taking the plunge into share dealing, Saga Share Direct provided by Equiniti Financial Services Limited allows you to buy and sell a range of UK shares and funds with competitive pricing and no annual account management fees. Aged 50 or over and would like more information? Click here or call 0800 092 9845. Lines open 8am to 6pm weekdays (excluding Bank Holidays).

Shares are high-risk investments. Share prices and the income from them can fall as well as rise and you may not get back the full amount invested. Past performance should not be taken as indication of future returns. This service is not suitable for everyone. If you have any doubt whether it is suitable for you, you should obtain advice from a financial adviser. Saga Share Direct is an execution-only service, which means we do not offer advice. 

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.