Two arrests in FSA boiler room inquiry

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The Independent Online

Police officers have arrested two men in connection with a Financial Services Authority investigation into boiler rooms.

The arrests, made in North Yorkshire and County Durham, followed a 12-month investigation by the financial watchdog into the activities of Universal Management Services, a UK based-go-between that sent more than £5m in cash from UK investors to overseas boiler rooms. The apprehensions were carried out by City of London police, FSA investigators and local forces. The action was the first of its kind for the FSA, which had previously stuck to liquidation orders or freezing assets in it efforts to shut down the illegal share-selling operations.

"This is the first time we have taken this action and it shows that we will not hesitate to ... protect consumers," said Jonathan Phelan, head of retail enforcement. "Investors should be cautious when they are cold-called by any firm promoting or offering to sell shares and should first check to ensure that the firm is authorised by the FSA."

Boiler rooms cold-call people to sell them shares in fictitious or worthless companies and then disappear soon after receiving the money. No charges have been pressed yet, though £5.4m in assets have been frozen. The FSA estimated that up to 800 small investors had been victimised by UMS, which processed payments for at least six foreign boiler room operations including Trinity Finance International, Stanmore Advisory Group, and Enterprise Analytics.

The FSA said it had other investigations ongoing into the sector. Consumer awareness of foreign boiler rooms has increased in recent years.

If convicted, the suspects could be fined and sentenced to up to two years in jail.

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