‘Cold calling and high pressure sale tactics were put into play to target and then bully people into buying into their scheme. ‘
Share sale and investment fraud
Share sale, boiler room, hedge fund or bond fraud involves bogus stockbrokers, usually based overseas, cold calling people to pressure them into buying shares that promise high returns. In reality, the shares are either worthless or non-existent.
You are usually contacted out of the blue by a professional-sounding stockbroker who offers you investment opportunities that seem too good to be true. You are also promised free research reports, special discounts and ‘secret’ stock tips.
It is interesting and very revealing to compare the FSA's definition of acceptable cold calling with that adopted by the WIA:
'FSA: One-minute guide - Cold calling
Cold calling can expose consumers to high-pressure sales tactics which mean they can end up with an inappropriate or over-expensive product or service.
How do we define cold calling?
Cold calling is where a financial promotion is made during any dealings with a customer, which the customer did not begin.
What are the specific rules for investment business?
Investment rules allow for three scenarios where cold calls could be made:
the promotion is to an existing customer who anticipates receiving a cold call;
WIA definition of cold calling:
'The Association defines a cold-contact as a telephone call (or other communication) made to a private individual where there has been no previous communication with that individual, and where the individual has not provided his telephone number and/or given prior permission for the telephone call.'
Significantly different! The WIA's definition is a charter to pester people who have expressed no interest whatsoever in wine investment with the elderly and vulnerable being protected as the calls will be recorded!!
The WIA claims in its ‘Aims of The Association’:
6. To do such things as are necessary or expedient to sustain or raise the status of wine investment and the Members of the Association.’
If the WIA were serious about these three laudable aims they would have banned cold calling as they were urged to do so during their consultation period. Cold calling for investment purposes is both malpractice and is per se a high-pressure sales tactic. The companies who have signed up to the WIA have chosen to ignore the clear guidance given by the FSA for their own narrow commercial advantage. Claims of 'Higher professional standards' are pure window dressing.
Although I have previously welcomed the initiative in principle, I will not support an association that ‘purports’ to protect the public yet allows its members to cold call. In my experience, shared by the FSA, the vast majority of investors who have been scammed or persuaded to buy unsuitable or overpriced wine investments have been lured by an initial cold call.
Until the WIA comes into line with the FSA on cold calling I cannot support this initiative. I see no reason why the public should have any confidence in the WIA as it currently stands.
I am, however, in favour of a self-regulatory body for wine investment if it can provide confidence to the public that it is safe to invest with a member of WIA as well as providing protection for legitimate companies offering wine investment. Unfortunately the WIA is currently a wasted opportunity.
Two articles on Cold Calling:
Jancis Robinson MW: Cold Calling – a serious warning
Tom Lewis: The Cambridge Wine Blogger: Cold Calling and the Data Protection Act 1998