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Beware of New Small Business Scam
If you run a small or medium sized company
then you need to be aware of a new share
based scam targeting SME owners and private
investors.
 According
to the Financial Services Authority (FSA);
the scammers use illegal ‘boiler rooms’
(rooms of people making very high pressure
sales calls) to persuade private investors
to buy shares in small companies at vastly
over inflated prices, and then pocket most
of the money themselves. They then vanish,
leaving the investor thousands of pounds out
of pocket.
Small businesses are at risk because the
scammers are targeting genuine companies
that wish to raise money by selling shares.
They offer to sell your shares for say
£100,000, and then take a huge percentage as
their “fee”, as well as the additional money
they make by overcharging investors.
The scam not only loses you money, but
creates angry investors; which can seriously
damage the image of your company. Another
added danger with this scam is that your
business could be left owing tens of
thousands of pounds; under UK law, you could
be required to refund the full amount paid
by the investor, even though you only
received part of it.
You should also note that it is illegal for
the majority of private limited company
(ending in Limited) to sell shares to the
public without producing a prospectus
outlining the offer. You should always seek
advice before taking such a big move with
your business, especially if you are wary of
a scam or other misleading deal.
You can visit the Financial Service
Authority’s website here.
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