Boiler rooms are illegal offices which seek out consumers through unsolicited phone calls or circulars, promoting and selling overpriced, non-existent or non-tradeable shares. The boiler rooms then often vanish, leaving investors reeling from financial losses and owning shares which have little or no value to them. Boiler rooms are mainly based overseas, therefore the Financial Services Authority (FSA) has generally not been able to shut them down directly.
The regulator has instead sought to target companies based in the UK which are thought to have assisted such boiler rooms. Early this year, the FSA froze the assets of Chesteroak and Bingen Investments and subsequently shut them down in September for assisting boiler room activities in the UK. Furthermore, last month the FSA ordered the arrest of two men who worked for Universal Management Services, believed by the FSA to have been helping illegal overseas boiler rooms. This was the FSA’s first criminal investigation into this area.
