FSA secures first conviction for boiler room fraud
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.