24 March 2014
The number of dawn raids conducted by the Financial Conduct Authority has almost doubled in one year according to RPC LLP.
RPC says that the increase in dawn raids by the Financial Conduct Authority (FCA) - 20 raids conducted in 2013, up from 11 raids in 2012 – is partly being driven by a crackdown on ‘boiler room’ scams.
Boiler rooms are high-pressure sales organisations. The sales force will often make unsolicited calls to potential investors in an attempt to pressure them into buying high risk shares or other investments. In some instances these investments will be sold at far above their market value.
Some boiler room firms will falsely claim that they are FCA regulated to gain legitimacy in the eyes of their targets.
Richard Burger, Regulatory Partner at RPC, says: ‘The surge in boiler room dawn raids by the FCA demonstrates how tough the regulator is when it comes to confronting illegal activity.
‘The FCA will use everything in its armoury to go after criminals including high profile dawn raids and robust criminal prosecutions which can result in heavy custodial sentences and confiscation orders.’
The FCA undertakes dawn raids to prevent the destruction of paper records and computer files as well as to prevent the removal of PDAs and other mobile devices. It is important for the FCA to obtain a complete list of customer records so that they can contact them.
In late February, 110 people including 20 in the UK were arrested in dawn raids as part of Operation Rico, a multi-jurisdiction investigation into boiler room fraud.
Richard Burger adds: ‘While boiler room activity takes place at the fringes of the financial services sector it can still result in a large number of, often, retired victims.’