On 16 June 2016 the FCA announced that five individuals have been charged with conspiracy to defraud, together with offences under the Financial Services and Markets Act 2000 and the Fraud Act 2006.
The charges follow an investigation by the FCA in relation to the promotion and sale of shares in Atlantic Equity LLC (formerly known as Berkeley Brookes LLC), between July 2013 and March 2014. It was alleged that all five defendants were involved in the promotion and selling of the shares through a succession of four "boiler room" companies. First Capital Wealth Ltd, Bishops of Mayfair Ltd, Wallberg Dillion Reid Ltd and Sterling Capital Corporation Ltd; all of which traded from London.
The FCA alleges that the defendants were involved in the promotion of investment schemes that offered investors interests in a purported commercial development in Madeira in which 175 investors may have lost approximately £2.75 million.
In addition, two individuals have been charged with perverting the course of justice contrary to the common law and one has been charged with money laundering offences contrary to the Proceeds of Crime Act 2002.
The individuals will face trial on 4 September 2017.
These share scams take their name because they are often run from "boiler rooms" where fraudsters cold-call investors offering them often worthless, overpriced or non-existent shares. High-pressure sales techniques are used promising high returns, but investors usually end up losing their money. The FCA has found that victims of boiler room fraud lose an average of £20,000, with up to about £200 million lost in the UK each year. The victims are not restricted to unsophisticated investors; the FCA state that the biggest individual loss reported by the police is £6m.
Since the people selling the shares do not have FCA authorisation to do so, boiler room scams constitute unauthorised business, which is punishable by up to two years imprisonment or a fine or both. In addition, the prosecutions are often pursued together with other fraud offences.
The FSA (as it then was) secured its first criminal conviction for a boiler room scam in June 2011, followed quickly by its largest in August 2011. The latter resulted in three men being jailed for 19 years between them for conspiracy to defraud, as a result of their involvement in a syndicate of 16 boiler rooms that defrauded an estimated 1,700 UK investors of £17.5m in total.
This most recent charge shows that the FCA continuing the pursuit of its predecessor in taking action against businesses not authorised under the Financial and Services Markets Act 2000 ("FSMA").