Hong Kong SFC Issues Warning Over Boiler Room Investment Scams

by Mary Swire, for LawAndTax-News.com, Hong Kong

11 August 2003

Hong Kong's Securities and Futures Commission (SFC) last week warned investors about a resurgence of investment scams known as 'boiler rooms'.

In a statement released on Thursday, the SFC revealed that it has added 13 firms to its alert list of securities fraudsters following 38 complaints related to boiler room investment schemes this year.

The Commission announced that:

'According to information gathered by the SFC, boiler room operators have become active again recently and there are signs that more Hong Kong investors have become the targets.' It went on to explain that:

'In most cases, investors receive unsolicited calls from overseas companies to offer investment services. Often, these companies claim to operate in country A by giving an address of a business centre, approach investors in country B to lure investments in country C, and settle transactions in the country where they purport to operate or in country D. Yet they are actually operating in some other places.'

Common factors shared by most boiler room scams include the use of virtual offices and absence of face-to-face contact, the employment of high pressure sales tactics to encourage investors to invest in difficult to understand instruments, and the tendency to disappear once the money is received, leaving investors with worthless share certificates and no recourse.

In order to avoid being taken in by such securities fraudsters, the Commission advised investors to:

- Verify the legitimacy of the individual or company with the SFC's Public Register of Licensed Persons and Registered Institutions (or with the regulator in the jurisdiction in which they claim to operate);

- Check the authenticity of the investment product offered with the relevant regulator; and

- Never invest on the basis of an unsolicited sales pitch alone.

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