Regulator warns against rising ‘boiler-room’ scams

by NZ Adviser18 Nov 2016
As part of International Fraud Awareness Week, the Financial Markets Authority (FMA) has noted the increase in cold-calling and ‘boiler-room’ scams affecting not only first-timers but professional, experienced investors.

Paul Gregory, director of external communications and investor capability, says “These crimes are much more prevalent in New Zealand than people realise and scams really can happen to anyone.  John* is an experienced investor we know of who got caught out by sophisticated fraudsters and lost over US$40k through a share scam.”

The FMA said New Zealanders have lost millions of dollars through cold-call scams, sometimes known as ‘Boiler room’ scams. The operation, which are established by a team of fraudsters in makeshift offices outside of the country and beyond the FMA’s reach, offering non-existent, worthless or overpriced investments. They mostly sell shares but the FMA is also aware of FX trading, binary options and sports investment schemes being sold in this way.

“Often the deals through cold-calls and boiler-rooms sound too good to be true,” said Gregory. “We recommend when considering any investment make sure you do your research, deal with a licensed provider and talk to an adviser if you need to.”

Bronwyn Groot, from BNZ’s Financial Crime and Security team said, “These scams take fraud to a new level – they are incredibly slick operations that target informed, high-value investors. The money loss is huge, around half a million dollars in just one case alone.” 

Groot says a red flag with this new operation is that it was a pressured sale – much more so than is allowed here in New Zealand and urgent sales tactics should automatically set off alarm bells. 
 

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