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Screenshot of a breaking news alert e-mail from Q2 2017
Whilst the times of harsh sales tactics by disreputable companies are largely a distant memory due to stringent regulation which now controls most of the global electronic trading business, eight companies have attracted the attention of regulatory authorities recently, resulting in a collective warning, citing the entities as perpetrators of what is colloquially known as a boiler room.
The term boiler room refers to an outbound call center selling questionable investments by telephone. It typically makes reference to a room where a sales force operates by using unfair, dishonest sales tactics, sometimes selling unlicensed, unregulated online trading services to retail customers, private placements or committing stock fraud.
In this particular case, Belgium’s Financial Services and Markets Authority (FSMA) has cited the eight entities which it considers to be engaging in this practice as t Green Seed Capital and CDH Investments, United Global Trading, Gemasia Investments Corporation, Burton Financial Planners, Euro Asia Invest, Moss Securities and Excel Management, full details of which are available on the FSMA website.
The FSMA has stated in its warning that it wishes to reiterate that boiler room fraud is a form of fraud that involves contacting consumers on an unsolicited basis, often by telephone, offering to sell them little-known shares or exotic financial products.
Although such boiler rooms claim to be a recognized service provider with a professional website and forms to fill out, they are in reality swindlers who offer fictitious or worthless shares or products. As a rule, the consumer is enticed to make an initial, limited investment that soon appears to be profitable.
The FSMA continues to assert that following application, customers are often asked to make more and more additional investments. Often, when a customer makes a second investment, there is a different outcome. Unlike the first, limited investment, the new investments lose money, and when a consumer asks for his or her money back, it is usually impossible unless he or she makes additional payments.
The boiler room operators often do not hesitate to put the consumer under severe pressure (hence the term “boiler room”).
The FSMA has published an example from customers on its website which provides letters of complaint to the regulator from customers of such entities, explaning that unsolicited telephone calls were made in order to solicit deposits from customers by using forceful sales tactics, including the sale of shares at a very low price in exchange for profitable shares. Subsequently the client was then asked to purchase further shares in other entities, subsequently being unable to withdraw money from the firm.
A further example ivolved a customer which was contacted by a fraudulent firm in December 2013 which claimed that it had a registered office in Japan, asking the customer to invest in shares in technology firms traded on the American stock market. To date, according to the FSMA, the customer has invested around €25,000.
In April 2014, the FSMA states that the customer asked the company to sell the shares, since their price had already risen sufficiently. To date nothing has been paid out to the customer, and the company asked the customer at the beginning of this month to pay a Surety Bond for a value of USD 7,480.00. The reason they gave, according to the FSMA was that the customer, or someone with the same name as the customer apparently outstanding taxes in the US. Until the client pays the Surety Bond (into an account number in China), the funds are being withheld.
The FSMA advises potential investors to exercise extreme caution if approached by such entities, and to avoid depositing funds into the schemes offered.
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