FSA reveals £200m cost of share fraud

Share fraud in the UK costs investors around £200m a year, with the average victim losing out to the tune of around £20,000, according to the Financial Services Authority.

A notice published on the regulator’s website warning customers to be alert in 2012 for scams said that the watchdog receives around 5000 calls a year from individuals that suspect they may have been victims of fraud.

It said even seasoned investors have been caught out, with the biggest individual loss recorded by the police being £6m.

The FSA warning said: “We receive almost 5000 calls each year from people who think they are victims of share fraud.

“Unfortunately about 20 per cent of these people have already paid money to the criminals, but this is down from about 60 per cent a few years ago.”

The FSA told investors it takes an average of about four calls from the scammers before people contact us, but the sooner they do the less likely they are to be defrauded.

Its warning came after the regulator’s consumer website revealed that it has been given the green light to repay more than £200,000 to investors who were misled into investing in a boiler room scam.

In a notice on its website, the FSA said more than £260,000 received from Aniz Kassimali Danji Manji, owner of Bayshore Nominees Limited, and Suresh Maganlal Bhowan, sole director of the firm, will be distributed to victims of a share scam also involving Gatemore Securities and Enterprise Analytics Incorporated.

The FSA notice said: “The High Court has agreed that we can share £260,608 among more than 500 people who invested in a boiler room scam involving Manji and Bhowan.

“The two men were ordered to pay us more than £1m to distribute to investors. Unfortunately, as is typical with these cases, it is highly unlikely we will receive the full amount owed, so we are acting now to distribute the funds we have been able to recover.

“The court has given us permission to distribute funds to victims on a pro rata basis, which we expect will result in a pay out of about 7p for every £1 paid to Bayshore.

“We believe this is the fairest way to return money to victims of the scam and follows the approach we have taken in similar cases.”

The FSA notice said Manji was ordered by the court in February 2009 to pay the FSA £1m to be distributed to investors, of which it has have received £243,371.

According to the notice, the sale of a property in London accounted for most of this sum and the FSA expects to recover slightly more as the sale process is completed.

The notice said: “Any further money received, and interest earned on the recovered funds, will be added to the pool of money available for distribution to investors.”