Venture Capital Trusts are warning investors about fraudsters running scams to try to con them out of cash.
Although Venture Capital Trusts (VCT) come with attractive tax incentives, the investment calls for cash to be tied up for some years.
This can tempt some investors to listen to bogus financial advisors offering them a higher than market value for their shares, according to investment news web site SEIS.co.uk.
The lure is the buyer values the shares at a price that covers any tax loss for selling VCT shares before the end of the term.
For investors who fall for the smooth talking sales patter, the next party of the scam is the sting.
Bogus advisors
The so-called advisor will explain the deal to buy the shares cannot go ahead until some upfront administration fees are paid to release the shares from the VCT.
“At this point, the bogus advisor will ask for bank details to make the cash transfer,” said a fraud squad spokesman.
“Our advice is never give any bank details. These fraudsters get VCT shareholder names off public registers and cold call hundreds of people to try to snatch some cash from them. As soon as they get some money, that’s the last an investor will hear from them.”
Fund managers also explain that trying to check out the scammer does not help, SEIS.co.uk.
“In many cases they set up a Skype number similar to a fund telephone number and have one of their own people manning the other end,” says advice on the web site.
VCT investors who want to sell their shares early should contact the fund manager who arranged the investment.
Sometimes they have buy-back deals or can trade the shares on a secondary market.
Boiler room cons
The web site also warns several fund managers are concerned about ‘boiler room’ operations posing as real funds. They try to sell worthless shares to unwary investors at inflated prices posing as bogus VCT operations.
SEIS.co.uk quotes VCT manager Octopus, whose web site says: “We would like to alert all shareholders in Octopus managed VCTs to the misuse of the Octopus name by third parties who claim to be connected to Octopus or our VCTs in some way.
“We have been made aware of cases where shareholders have been contacted by someone selling shares in companies which have little or no value, or may not even exist or offering to buy their shares at a higher price than their market value.
“These types of scams are targeted at existing shareholders and will sound like attractive offers. The caller will often ask you to pay something upfront, such as a bond or other form of security which they claim you’ll receive back if the sale doesn’t go through. They may also ask you to sign a form preventing you disclosing details of the offer.”
