Financial Conduct Authority
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FSA calls for greater international cooperation to tackle boiler room fraud
The Financial Services Authority (FSA) has called on regulators and law enforcement agencies from around the world, including the US Securities and Exchange Commission and the Spanish and German regulators, to help tackle a fraud that reaps about £300 million yearly from the UK public, for criminals.
Up to 20 countries are expected to be represented at the first international boiler room conference, organised by the FSA. The conference which is taking place today and tomorrow at Merchant Taylors’ Hall in London aims to encourage a global response to this global problem.
Margaret Cole, FSA director of enforcement, in a speech to the conference said:
“The FSA’s investigations into boiler room activity are showing us just how international the crime is. A firm might be operating out of one country, targeting people in another. But when we follow the trail of the victims’ money, we often find a complex web that may take in a further five or six jurisdictions spanning three or four continents. To take effective action we need to get right to the root of the operation.
“In order to do this, we want to form a strong alliance with our international counterparts, working towards a common goal, sharing information and ideas and understanding that ultimately when we’re talking about boiler rooms, we’re talking about serious organised international crime. We need to provide credible deterrence against these criminal operations and I’m convinced that by working in partnership, together we can make a real impact.”
Each year, around 30,000 people fall victim to boiler rooms in the UK alone – estimates put the total fraud at £300 million. Typically, victims can be ‘groomed’ over weeks or months by fraudsters who call them regularly, eventually persuading them to buy worthless shares.
The problem is global. Boiler rooms are based overseas, often in Spain, Hong Kong or North America. But their victims tend to be in the UK, Germany, United States and Scandinavia.
The FSA has launched a number of initiatives this year to help raise awareness of boiler rooms. These include:
- working with the Institute of Chartered Secretaries and Administrators to urge listed companies to send warnings about boiler rooms to their shareholders;
- working with APCIMS, the stock broking trade association on a leaflet for its members to give to customers warning them about boiler room fraud; and
- improving the information given to consumers about boiler room fraud through our website www.moneymadeclear.fsa.gov.uk.
In the past 18 months, the FSA has also taken action against 7 entities for acting as or assisting boiler rooms, including taking out injunctions, freezing assets, making people bankrupt and starting criminal investigations. In March, the FSA helped to refund around £1 million to UK investors.
Notes for editors
- Anyone who has been cold called by companies offering to sell them shares can report this to the FSA by calling its consumer helpline 0845 606 1234 or by using the online form available on its consumer website www.moneymadeclear.fsa.gov.uk.
- Boiler rooms target investors in several ways:
- High-pressure cold-calling to offer attractive share opportunities
- Selling at inflated prices US 'Regulation S' shares which are banned for sale to US investors;
- Recovery room fraud - offering to buy shares, for an upfront commission, back from people who bought their initial shares from a boiler room;
- Threatening unspecified 'legal action' and freezing the assets of potential shareholders who decide not to purchase shares, forcing them to go through with the trade.
- The Institute of Chartered Secretaries and Administrators (ICSA) is the qualifying body for company secretaries and a leading authority on corporate governance. It publishes guidance notes and best practice guides and through its subsidiaries provides information and training, boardroom performance evaluation and dedicated software. The ICSA has 36,000 members worldwide and is represented in over 70 countries.
- The FSA receives and deals with an average of 5,000 consumer enquiries a year on boiler rooms. Consumers can check whether a firm is authorised by the FSA, or if the firm calling is on the list of 500 known unauthorised firms which illegally target investors. The FSA works with a range of stakeholders including the City of London Police and international regulators to protect UK investors from boiler room fraud.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.