FSMA Issues Warning Against Boiler Rooms, Recovery Room Fraud

Boiler room and recovery room scams continue to permeate the industry, leading the FSMA to warn against such activities.

The Financial Services and Markets Authority (FSMA) has issued another public warning, this time against the unauthorized activities of multiple ‘boiler rooms’ and of a ‘recovery room’ that are contacting Belgian consumers, per a recent FSMA statement.

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The Belgium-based FSMA helps bring to light a number of fraudulent schemes and predatory organizations that conspire against traders and market participants in the country. The FSMA also advises against deposits and the transfer of money to these entities, given the inherent risk involved. While previous warnings have centered on forex firms in years past, a large majority of unregulated entities have recently been binary options providers as well or alternative operations, such as boiler room scams.

The FSMA defines ‘boiler rooms’ as any type of fraud that involves the contacting of customers in an unsolicited manner or medium, most commonly by telephone, making offers on rather obscure shares or exotic financial products. Compounding this issue for potential market participants is the claim that boiler rooms commonly make that they are authorized service providers, complete with a professional website and forms to fill out – it should be noted that these entities are in no way authorized to deal such products or solicit these transactions or trades.

By extension, the FSMA has also warned against the propensity of a ‘recovery room’, which operates as an additional layer of fraud, which consists of contacting victims of an earlier scam or fraud, in a bid to offer assistance in recovering the losses incurred. Fraudsters will routinely levy fees for this type of service for payment in recovering lost sums, however all authorized regulators or handlers abstain from charging fees. A similar warning was made by the FSMA back in March, which pointed out the same behavior, preying on victims of earlier fraud.

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Unfortunately for market participants and victims of fraud there are a number of illegal and fraudulent organizations in existence that are relentlessly trying to dupe individuals. For this reason, the FSMA has outlined a multi-point strategy in ascertaining the validity of these entities, including the following checks that should be routinely performed:

– Verifying the identity of any organization contacting you

– Checking and staying up to date with the FSMA warnings

– Checking whether the investment firm holds an authorization

– Exercising caution with cold calling techniques

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