'Boiler room' share fraud suspect bailed

Nov 13 2007 by Peter McCusker, The Journal

A NORTH-EAST man arrested over allegations of involvement in a £5m share fraud has been released on bail until next year.

The Journal reported 10 days ago how the County Durham man was one of two men arrested in raids by the Financial Services Authority (FSA), the City of London Police and police forces in Durham, North Yorkshire and Hampshire.

The Journal has since learned the County Durham man had been arrested at an address in Darlington and has now been released on bail until April 2008.

The arrests follow an FSA investigation into Universal Management Services (UMS), which the FSA believes is taking payments on behalf of overseas “boiler rooms.”

Boiler rooms are not authorised by the FSA and act illegally by promoting and selling shares in the UK that are overpriced, restricted for onward sale and have little or no realisable value.

The boiler rooms then often vanish, leaving the investor out of pocket. Boiler rooms are mainly based outside the UK and therefore the FSA is usually unable to take direct action to shut them down. About 800 investors in Britain are believed to have been affected.

The FSA said it suspected UMS – not registered as a UK company and unrelated to four other companies with similar names – had sent investors’ money overseas with the help of related operations GS Asset Management and Continental Administrative Services.

FSA head of retail enforcement Jonathan Phelan said: “This is the first time we have taken this action and it shows that we will not hesitate to use our powers to protect consumers, including launching criminal investigations where appropriate.

“Investors should always be cautious when they are cold-called by any firm promoting or offering to sell shares and should first check to ensure that it is authorised by the FSA.”

Customers of UMS can call the FSA on 08456 606-1234.