The FSA recently secured its first criminal conviction for boiler room fraud.  At Southwark Crown Court, David Mason pleaded guilty to:

  • 13 counts of carrying on a regulated activity without authorisation;
  • one count of making false or misleading statements, promises or forecasts; and
  • three counts of money laundering.

He was sentenced to two years’ imprisonment, and disqualified as a director for six years.

The case highlights a number of noteworthy points:

  • First, the FSA is still interested in breaches of the general prohibition (sometimes know as perimeter breaches) – i.e. undertaking regulated activity without FSA authorisation – and will bring criminal prosecutions where warranted.  (Compare this fraud case to that covered in my blog of 9 February in which the FSA merely wound up the firm);
  • Secondly, the criminal courts take these matters seriously and will impose significant custodial sentences. Two years on a guilty plea is equivalent to three years if found guilty after a fully-contested trial; and Finally, the FSA is still working well with the City of London Police to tackle market misconduct, to protect the perimeter and guard against money laundering.

And for those still wondering – apparently boiler room frauds get their name from frauds committed by US mobsters. Organised criminal gangs would ‘rent’ the boiler rooms of Wall Street offices and thereby obtain a Wall Street address. Posing as Wall Street stockbrokers, they would sell bogus securities to the unsuspecting public.