The Financial Market Authority (FMA) has become aware that a form of investment fraud known as scalping is now increasingly spilling over into Austria from abroad. The perpetrators of this type of fraud attempt to use fake market letters, newsletters and analyst comments to persuade investors in the general public to buy shares that actually have no value. The affected securities are marketed with headlines such as “1000% profit opportunity!”, “Sure-fire investment recommendation – buy this share” and “Guaranteed profit in 3 months!” However, the shares normally relate to failed companies or “empty” letterbox companies that are located in English‑speaking countries and listed in local market segments that are subject to few, if any, rules for issuers. The perpetrators themselves hold the majority of these securities, which, in truth, have no value. They then pass these off to the unsuspecting investors once the fraudulent information services have artificially pushed up demand for the shares, and have thus also manipulated the price to artificially high levels, luring in investors. Once the fraudsters have cashed in, the price collapses again.
Potential investors are often also contacted by telephone. Moreover, unsolicited telephone calls, e-mails and faxes from “investment experts” who are unknown to the investor are now prohibited following the ban on cold calling. Cold calling is the technique of making telephone calls or sending faxes for marketing purposes without the prior permission of the recipient, and has been ruled to be illegal. The FMA reminds investors that cold calling can be reported to the local responsible telecommunications office.
In addition, one-to-one investment advice that refers to a specific financial instrument (e.g. “Buy shares in company X, because the price is about to rise”), even if only given over the telephone, requires a mandatory licence from the FMA in accordance with the Wertpapieraufsichtsgesetz (Securities Supervision Act). Investors may consult the FMA website (fma.gv.at) to verify whether an adviser holds such a licence.
Warning signs of which investors should take note:
Unrequested materials such as market letters, newsletters and analyst comments should be viewed with a critical eye.
Unsolicited telephone calls, e-mail or fax messages should always be interpreted as a warning indicator.
Before investing in unknown companies that trade in largely unregulated segments of the stock exchange, always obtain detailed information (such as the length of time the security has been listed, the volume of shares that have been traded, etc.).
Unprofessional-looking websites for the companies concerned, where no annual reports, details of executives, etc., can be found, should be viewed critically. Often these are mere letterbox companies that have no operating business.
Nevertheless, even professional-looking websites and glossy brochures are no proof of a company’s respectability.
If investors become aware of such activities, they should forward the relevant information to fma(at)fma.gv.at.
There are currently no indications that any securities that are listed on the Wiener Börse are being misused for the purposes of scalping.
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-5106
+43/(0676)/882 49 516
fma.gv.at