BUSINESS owners are being warned to beware of a share scam.

Fraudsters are approaching businesses offering to manage their share sales to the public.

They then call people and sell them shares - but often pocket the investor's money and vanish.

The Financial Services Authority (FSA) has warned about the scams, as businesses are being left to compensate the people who have bought the shares.

The fraud involves "boiler room" tactics, in which people are cold-called and offered shares.

The shares can turn out to be worthless or non-existent.

The fraudsters target small companies that need to raise investment. The company's agreement to take part in the transaction gives the share offer a degree of respectability, helping to reassure potential investors.

The FSA advised companies approached to seek legal advice. Emma Sewell, corporate finance associate at North-East law firm Ward Hadaway, said: "It is crucial that companies are aware of this new share scam currently operating within the UK which could have a serious financial impact on companies and their directors.

"There are strict legal procedures which need to be followed if companies wish to issue shares to new investors.

"These legal requirements are designed to protect investors with the result that companies and directors who do not follow these rules run the risk of being prosecuted, fined or ordered to pay compensation."