AMF: Boiler room schemes

AMF warns the public about an aggressive marketing technique called “boiler room”

The AMF warns the public about this fraudulent practice that encourages investors to purchase financial products on the basis of salespitches unrelated to the real value of the assets in question and with the promise of extremely high price increases. The AMF calls onretail investors to exercise the greatest vigilance.

Boiler room marketing is a practice whereby an unauthorised entity presents itself as a brokerage firm or an asset management companyand contacts investors, unprompted and often by telephone, to showcase the potential of an asset in which they hold an interest. Byemploying aggressive sales tactics and promising high yields, the aim is to encourage individuals to invest in the asset in question andthus enable the manipulators to sell their shares at a high price.

This type of fraud, in existence for a number of years, may concern listed companies in a number of European markets and may targetretail investors across Europe.The AMF has indications that suspicious buying recommendations are currently being made for shares listed on Euronext Access, notablyincluding:

  • Media Lab (IT0005324105)
  • Arthur Maury (FR0013268067)
  • Design your Home (SE0007045380)
  • Gour Medical (FR0013371507)
  • Parx plastics (NL0012650535)
  • Italy Innovazioni (IT0005336521)

The AMF has information indicating that these buying recommendations could be based on information that is false or misleading and/orpossibly conceals existing conflicts of interest. Some of these actions could constitute criminal offences.Before analysing the issues of this fraud, it should be pointed out that the vast majority of the shares involved concern companies whosestocks are quoted via the double-fixing system. This applies to shares that are not very liquid. Thus, unlike continuous listing, where ordersare matched to transactions and prices determined instantly throughout the day, with double fixing, there are only two listings each day, inthe morning at 11.30 am and in the afternoon at 4.30 pm. In between these two listings, the order book is filled with buy and sell orders,and there is no quotation that generates a price immediately.

The AMF is calling on retail investors to exercise the greatest vigilance by:

  • checking that the financial intermediary proposing or advising financial investments is registered and/or authorised to operate inthe jurisdiction in which it claims to do so;
  • not responding to the sales communications of unregistered or unauthorised entities and not passing on their information to thirdparties;
  • filing a complaint with the competent court and providing the competent legal authorities with as much information as possible(money transfer references, identified contacts, postal and email addresses, Skype, etc.);
  • applying the cautionary rules described above and keeping proof of their exchanges (telephone conversation recordings, screencaptures, etc.) if they do decide to invest.

Lastly, the AMF reminds investors to follow these safety guidelines before making any investment:

  • no advertising materials should make you overlook the fact that high returns always involve high risk;
  • learn as much as you can about the company or intermediary trying to sell you a product (authorisation/certification, companyhistory, location of head offices, etc.);
  • only invest in a product you understand;
  • ask yourself how, and by whom, the purchase price or selling price of the advertised product is set, and find out the precise termsand timeline for selling the product, especially in cases where the product invests in an asset class with low liquidity.

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