AFM warns against boiler rooms

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There are many so-called “boiler rooms” operating in Netherlands; these are parties that aggressively sell worthless or fake shares over the phone. It is important to warn consumers that they should never accept offerings from persons that approach them in this way. They would be wise to check whether such persons are on the boiler room warning list.

The Netherlands Authority for the Financial Markets (AFM) is warning consumers against boiler rooms following a broadcast in the series Tros Opgelicht?! The AFM considers boiler rooms to be a major problem, despite a decrease in the number of reports about this type of financial scam and fraud. This is why tackling the boiler-room problem has a high priority.

A “boiler room” is the generic name for dishonest individuals and organisations that use cunning sales persons to call potential investors with the aim of persuading them to buy worthless or nonexistent shares. Investors are put under great pressure to transfer money abroad. Boiler rooms often use websites that appear trustworthy, sometimes using a name similar to that of a well-known financial organisation.
Although boiler rooms are a persistent phenomenon, since 2010 the AFM has seen a decline in the number of reports that it receives about them. From an average of two or three a week, the number fell to one or two a week in 2012.

What can you, the consumer, do?

On the AFM’s website, there is more information about boiler rooms. The AFM also has the following step-by-step instructions for consumers to help you avoid being swindled by a boiler room:

  1. Never buy shares over the phone or by e-mail. Boiler rooms are often highly insistent. Do not be drawn into a conversation, but always hang the phone up immediately. 
  2. Consult the registers of the AFM or the website of the foreign supervisor in the country where the organisation claims to have a registered office, to check whether it has the required licence. Call the organisation back using the information you found in the registers, to determine who is behind it.
  3. Using Internet search engines, check whether anything is known about the offer in question. Are extremely high returns promised or is the offer too good to be true? Then it is not genuine.
  4. Do not pay any restriction fee or other vague cost to an unknown institution.
  5. Using Internet search engines, verify the name of the share.
  6. Always be extra cautious if a company or individual asks you to transfer money to a foreign bank account or via a money transfer system.
  7. Consult the AFM’s warning list as well. This contains companies that have contacted people regarding an investment proposal, without being asked to. The AFM recommends that investors should not accept offers from any institution that is on this warning list.
  8. Consult IOSCO's warning list as well. This contains warnings from foreign supervisors that are members of IOSCO.

The AFM urges investors to phone the Financial Markets Information Line if they receive a call from a boiler room. We will then inform investors to the best of our knowledge about the risks involved in dealing with boiler rooms.

If investors have been duped by a boiler room, the best thing they can do is to contact a lawyer who specialises in investment fraud. By uniting themselves through a joint action, they will have more power.

What does the AFM do?

The AFM attaches great importance to reliable financial markets and gives high priority to tackling the problem of boiler rooms. Based on information received, from consumers and others, the supervisor is conducting an investigation into these organisations. In connection with this, the AFM is working closely with the police, Fiscal Information and Investigation Service, judicial authorities and foreign supervisors, by sharing information, for example. Dealing with the problem of boiler rooms is not easy, as they often operate from abroad and frequently change their names.

A possible outcome of an investigation by the AFM into a boiler room is a public warning. This will then appear on the boiler room warning list. Foreign supervisors include the warning in their own warning lists.
Boiler rooms are common in other countries, too, with foreign supervisors regularly issuing warnings about them. These warnings are on the foreign warning list on the AFM’s website.

In 2012, the AFM issued a total of 36 warnings.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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