Financial Services Authority Warns On Investment Fraud


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The UK Financial Services Authority (FSA) is warning over 75,000 people that they could be, or have been, targeted by fraudsters. Victims lose tens of millions of pounds to investmen

The UK Financial Services Authority (FSA) is warning over 75,000 people that they could be, or have been, targeted by fraudsters. Victims lose tens of millions of pounds to investment fraud each year and the FSA urges investors to be vigilant and protect themselves from investment scams.

The FSA has recovered lists ? dubbed ?suckers lists? by scammers ? from companies it believes have been fraudulently selling investments. The lists contain names and contact details of people who are being targeted by fraudsters to con them out of their money, and are all believed to be current.

The lists are often traded between firms so anyone who has been targeted once has a high change of being contacted again.

The fraudsters are selling non-existent or worthless shares, or plots of land with promises of large investment returns when they were developed ? something unlikely to ever happen.

In a campaign known as ?Operation Bexley?, the FSA is writing to 76,732 people to advise them that their name is on the list – the largest FSA mailshot to date to prevent fraud. The letters are being sent out in waves, with the first lot sent on 24th April 2012. Around 19,000 will be contacted by email since the lists did not include their postal addresses.

Jonathan Phelan, FSA head of unauthorised business, advised recipients to read the letter as ?it could save your tens of thousands of pounds?. He asked anyone who has been contacted about a ?once in a lifetime? investment opportunity to contact the FSA as this could help them catch criminals and shut down scams.

Phelan added:

?The people that use them [these lists] are ruthless, calculated and will stop at nothing to steal your money.? He then goes on to say: ?A call out of the blue is one of the hallmarks of investment scams, so if you ever get an unexpected call with promises of fantastic returns – you should be extremely sceptical.?

Anyone who has queries about this letter, or about investment fraud in the UK in general, can contact the FSA on UK number 0845 155 6355.

Common investment scams

They all tend to offer a high return on your money. They usually offer to sell or buy shares, property or plots of land, rare goods or other investment opportunities. Many claim to have inside information, trade secrets or a hot tip.

Boiler rooms

Fraudsters use high pressure sales tactics, usually over the phone, to persuade investors to buy shares which turn out to be fake, overpriced or non-tradable. The companies are not authorised and usually based overseas. Where targeting UK investors they use bogus UK addresses and phone numbers routed overseas. Contact can also be made by email, post, word of mouth or even advertisements.

They promise high returns but investors usually lose their money – ?200 million is lost each year in the UK. On average victims lose ?20,000 but it can be much higher – one person lost ?6 million.

Pyramid and Ponzi schemes

These schemes basically use money from new investors to pay existing ones. The first investors will see returns, which help the scheme appear both genuine and profitable to new investors. Those who invest later usually lose their money. The capital is not actually invested and earning returns for the investors. The schemes collapse when the unsustainable supply of new investors and money dries up.

Ponzi schemes were named after Charles Ponzi, one of the greatest swindlers in US history. Pyramid schemes have the same format but in this case investors are encouraged to recruit new investors to earn commission.

FSA tips for avoiding scams

The FSA website gives tips on how to avoid being caught out by fraudsters. These include:

– Be very wary about investment opportunities where you are contacted out of the blue. Authorised firms are unlikely to do this or to use harassment or high pressure tactics.

– Check the firm or individual?s status on the FSA register (

– If the firm is registered, call them back on the phone number listed on the FSA register to confirm that the company is actually making the calls.

– Check the FSA?s list of unauthorised UK firms and individuals to avoid doing business with.

– Where dealing with a non UK firm or scheme, check how it is regulated and then check the firm with that regulator.

– Understand how the investment works. Scammers tend to be either vague on the details and how it can generate such high returns, or explain it with too much complex detail so it is hard to follow.

– Get independent or professional advice.

– ?Remember, if it sounds too good to be true ? it probably is.?

If in any doubt at all, contact the FSA.

The FSA only authorises and regulates UK firms. UK firms operating in the EU can be authorised and regulated by the UK FSA through an EU passporting system, as is the case with Blevins Franks Financial Management Ltd for the conduct of investment and pension business. This means that you can have a local adviser in Spain, France, Portugal/, Cyprus and Malta and still have peace of mind knowing that he is regulated by the UK FSA.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.