National campaign will target those most at risk of investment fraud, says FCA

Using funds recovered from the proceeds of crime, the Financial Conduct Authority (FCA) has launched a national campaign to warn people about investment fraud and how to spot a potential scam.

Investment scams generally involve high-pressured selling, using boiler room tactics, for products which often do not exist, including land-banking schemes, carbon credits and rare earth metals.

Martin Wheatley, chief executive of the FCA says:

'Those operating investment scams use very sophisticated techniques to build trust and can dupe even experienced investors out of their savings. With large numbers of people at risk, it’s important to know how to spot the signs of a potential scam.

'We would caution against anyone taking a risk on a firm or individual who isn’t authorised by the FCA. Our message is simple, don’t accept a cold call.'

The average investor loses around £20,000 and the FCA receives around 5,000 calls a year from investors about suspected investment fraud.

Investment scams are difficult to spot and are designed to look like genuine investments. The FCA has seen examples of fraudulent websites that mimic those of legitimate firms and investment brochures that would be likely to convince even an experienced investor that the product was genuine.

Those most at risk of investment fraud are people in retirement who are actively seeking an investment opportunity. One consumer told the FCA that he was called out of the blue by a firm that offered to buy the shares that he held in a company. The deal sounded legitimate and the website looked professional. It wasn’t until he was asked to pay a £5,000 bond to enable the deal to go through that alarm bells rang.

The FCA is encouraging anyone who is considering an investment to check its ‘Scamsmart’ website, www.fca.org.uk/scamsmart, and seek independent financial advice from a regulated professional before going ahead.

Key signs that the investment may be a scam:

• You are contacted unexpectedly about an investment opportunity through a cold call, email, or follow up call after receiving a promotional brochure out of the blue
• You are pressured to invest in a time-limited offer, for example, a bonus or discount is promised if you invest before a set date
• The risks to your money are downplayed, for example you are told that you will own assets you can sell yourself if the investment doesn’t work as expected, or legal jargon is used to suggest the investment is very safe
• The returns sound too good to be true, for example, better interest rates than those offered elsewhere
• You are called repeatedly and kept on the phone for a long time
• You are told the offer is only available for a limited time or to a limited group of people.

In the last year, the FCA processed 6,593 reports of suspected unauthorised activity, issued 295 consumer warnings and secured the removal of 61 websites promoting suspected boiler rooms. The FCA has also secured criminal convictions against 4 individuals who were involved in unauthorised activity, including running fraudulent investment schemes. It has also taken 8 civil injunctions this year.

Notes to editors

1. The FCA has launched its new tool ‘scamsmart’ to help people spot investment fraud, further information.
2. Action Fraud estimated in 2012 that £1.2 billion is lost annually through investment fraud.
3. Anyone who suspects a firm or individual of being involved in unauthorised activity or running a scam should report it to Action Fraud, 0300 123 2040.  
4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
6. Find out more information about the FCA.