Emma King and Richard Burger assess the FSA's attempts to tackle boiler rooms
Historically, to create a veneer of respectability, US fraudsters would rent the boiler room of a Wall Street office block. From their “Wall Street office”, the fraudster would sell worthless shares to the general public. The boiler room was born. The term now usually describes overseas operations that use high-pressure, cold-call sales techniques to persuade UK investors to purchase shares, which are often over-priced, have little or no resale value, or are even non-existent. The boiler room will then often vanish, leaving the investor out of pocket.
Boiler rooms are often based in Spain, Switzerland or the US and generally have small sales teams (a maximum of about 20 personnel) working together at sales desks. The junior “brokers” or “analysts” (these terms do not necessarily signify professional qualifications nor registration with a financial regulator) are young, paid on commissions and egged on by more experienced senior brokers.
Boiler room fraud is so widespread that the Financial Services Authority (FSA) receives around 6,500 consumer enquiries a year on
