Small businesses warned over share scam

The Financial Services Authority (FSA) is warning small business owners and investors across the UK to be wary of a new 'boiler room' scam involving shares.

The scam begins with the fraudsters contacting a small company and offering to sell its shares, typically to the value of £100,000, for a 60% fee.

The fraudsters then cold-call members of the public, and arrange to sell on the shares, often at between 10% and 100% more than the agreed value.

However, the scammers then disappear with their fee, leaving some businesses to pay back the full price of the shares to disgruntled investors.

The FSA warns that small firms are particularly at risk of being targeted, and business owners are being advised to remain vigilant.

David Mayhew of the FSA said, 'If the boiler room is taking a large precentage of the funds raised, many small companies would struggle to refund investors with the full price that was paid for the share. Both investors and the small company will be left considerably out of pocket'.