Stockbroker Brewin Dolphin is urging private investors to keep their investments in nominee accounts to escape the unwelcome attentions of hard-selling and all-too-often often fraudulent "boiler room" operations.
The broker said it had recorded a worrying increase in the number of British investors being targeted by boiler room fraudsters. These use high pressure telephone sales techniques to persuade investors to buy shares whose real value is significantly less than the sale price.
They are not regulated or authorised by the Financial Services Authority and are therefore acting illegally promoting the sale of shares in the UK.
Their victims typically lose £20,000, Brewin estimated, with little or no legal recourse.
Investors with legitimately purchased shares are at greater risk of being targeted by illegal boiler rooms, which use publicly available data from company share registers to identify potential targets.
Brewin Dolphin is advising investors that they can reduce their exposure to these scams by transferring their shares to a nominee account, which will remove their name from the public domain and make them invisible to fraudsters.
Nominee accounts also benefit investors because they simplify and accelerate the settlement process when they buy and sell shares. They enable the broker to register and administer an investor's holdings, collecting and distributing dividend and interest income directly into the client's bank account.
John Driver, a divisional director of Brewin Dolphin in Birmingham, said: "It is vital investors ensure they only trade through companies that are fully compliant with FSA regulations.
"The high pressure techniques employed by boiler room operatives include repeated calls and a sustained campaign of harassment. However, the perpetrators may sound highly educated and knowledgeable about the sector quoted and the wider investment market place.
"Boiler rooms often prey on investors looking for high yield, low risk returns within a short time frame. Boiler rooms disadvantage private investors and also on occasion the companies whose stock they trade.
"UK companies authorising a boiler room to act as their brokers could fall foul of legislators, in most circumstances it is a criminal offence for a private company to offer shares for sale to the public. Boiler rooms have also been heard of charging a disproportionate commission which has been known to be up to 90 per cent."