FSA/PN/020/2008
06 March 2008

The Financial Services Authority (FSA) has helped 153 investors to get back over £1m, after they were illegally sold shares by unauthorised, overseas investment firms also known as boiler rooms.

As part of its continuing work in this area, the FSA investigated the shares sold by various boiler rooms in two North American based-companies, Rocky Mountain Gold Mining Corporation and Rocky Mountain Gold Mining Inc (Rocky Mountain).

It found that UK investors had sent about £1.25million to North America where Rocky Mountain's operations were based. The FSA worked with Canadian regulators, the British Columbia Securities Commission ("BCSC") as well as the Ontario Securities Commission ("OSC"), to freeze the funds investors had sent over. The FSA also helped to ensure plans were put in place to refund the money.

Investors were very fortunate in this case as usually boiler rooms are structured to prevent such enforcement action. The funds returned to investors at this stage amount to 90% of the sum invested but it is likely that there will be other future payouts.

Jonathan Phelan, Head of Department in the FSA's Enforcement division said:

"This is a rare bit of good news for investors who have been persuaded to hand over money to boiler rooms as usually the money disappears without a trace. Investors are reminded to just hang up the phone when contacted by boiler rooms as in most cases these investments do not have a happy ending.

"Working in partnership with our Canada counterparts on the case helped to ensure that investors were able to get their money back this time."

Commenting on the case, Michael Watson, Director of Enforcement for the Ontario Securities Commission added:

"With the information initially obtained from the British Columbia Securities Commission and other sources, staff of the Ontario Securities Commission were able to act quickly to preserve the funds sent by investors. After these funds were frozen, the cross-jurisdictional co-operation between the OSC, the BCSC and the FSA was crucial in achieving this result."

Any investors who bought or believed that they bought shares in either Rocky Mountain Gold Mining Corporation or Rocky Mountain Gold Mining Inc and sent money directly to Ontario, Canada may be entitled to a refund.

The FSA has tried to contact all relevant investors for whom it has been able to identify contact details but some investors targeted by the boiler rooms may not be aware that they could be entitled to a refund. Any investor who has not yet been contacted by the FSA or the Ontario Securities Commission should call the FSA's consumer contact centre on 0300 500 5000 or email Peter Wright.

The sale of shares were not carried out by a UK authorised firm so investors can not complain to the Financial Ombudsman Service (FOS) or claim compensation from the Financial Services Compensation Scheme (FSCS).

Notes for editors

  1. 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.
  2. Consumers can download a leaflet on boiler rooms, check whether a firm is authorised by the FSA, or if the firm calling is on the list of 'known unauthorised firms'. Consumers that have been targeted by a boiler room can report information via a form on the FSA website or by calling the FSA consumer contact centre on 0300 500 5000. For further information on boiler rooms visit our consumer website.
  3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  4. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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