Thursday 27 April 2017

Dearbhail McDonald: If it sounds too good to be true, it is

Leonardo DiCaprio in ‘The Wolf of Wall Street’, which featured share scams similar to the ones doing the rounds in Ireland
Leonardo DiCaprio in ‘The Wolf of Wall Street’, which featured share scams similar to the ones doing the rounds in Ireland
Dearbhail McDonald

Dearbhail McDonald

Barely a week goes by without the Central Bank, which regulates financial services, issuing a warning about unregulated firms. We hear fewer warnings about so-called 'boiler-room' scams, in part because people are embarrassed that they fell prey to them.

Boiler room scams are part of a suite of share frauds that sees investors duped by sophisticated criminals (usually overseas) cold-calling them at home or work offering to buy or sell shares, with the promise of a huge return.

The shares the scammers offer are often worthless, overpriced and even non-existent.

But the fraudsters' tactics are extremely convincing, and hapless investors feel under pressure to fall for the oldest trick in the book - to make a quick decision or miss out on the deal.

For scammers, with their articulate financial knowledge, the rewards are more than worthwhile. The Financial Conduct Authority in the UK found that victims of share fraud lose an average of £20,000 (€23,367) to these scams, with as much as £200m (€233m) lost to such scams in the UK each year.

If you're feeling like a fool for being caught out, you're in great company.

Even seasoned investors are caught out by the sophisticated techniques deployed by boiler-room operators, who often ply their trade at financial seminars and through word-of-mouth schemes that saw many people lose their shirts during the property boom/bust debacle.

But you can take steps to protect yourself by checking to see if the firm is authorised by the Central Bank. Or just hang up: if you're cold-called about an investment opportunity, the chances are it's at best a high-risk investment or, at worst, a scam.

It can be confusing, as many fraudsters have credible-looking materials, including elegant websites with glowing testimonials. Familiarise yourself with the tell-tale signs, including repeat calls, downplaying risk and pressure over time limits.

The best piece of advice? If it sounds too good to be true, well, you know the rest.

Irish Independent

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