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Unfair Practices: Sales Methods

Volume 475: debated on Monday 12 May 2008

To ask the Chancellor of the Exchequer (1) how much his Department has spent (a) to raise public awareness of and (b) on consumer protection measures relating to fraud associated with illegal share sales boiler room operations in the last 12 months; (204155)

(2) what estimate he has made of the number of cases of fraud involving illegal share sales boiler room operations in 2007.

[holding answer 8 May 2008]: The Treasury does not undertake consumer protection activity or raise awareness of boiler room frauds directly. The Financial Services Authority has a specific statutory objective to protect consumers, which includes advising and protecting investors against boiler room frauds.

Expenditure on the prevention of boiler room fraud cannot be disaggregated from other crime prevention or awareness raising work by the agencies concerned, such as the Home Office, Financial Services Authority or City of London Police.

However, the FSA are able to estimate that the budget for enforcement staff working on unauthorised businesses (of which boiler rooms account for 60 per cent.) numbers 20 staff. They estimate that this will equate to around £20,000 hours at a cost of £650,000 for 2008.

The FSA have in the last 12 months taken part in a total of 11 broadcast media appearances on the issue, including a number of radio interviews and TV appearances on programmes such as the Money Programme and the BBC News at 1. The Police have likewise been working with the media, for example targeting publications that cater to the most at risk groups.

In the last 12 months, the FSA have also opened 250 boiler room inquiries, and the names of 215 boiler room firms have been added to their unauthorised firms list, an average of 18 per month. No estimate of cases of fraud involving boiler room operations in 2007 is available. However, the Office of Fair Trading published a report in December 2006 entitled ‘Research on impact of mass marketed seams’, which did assess the number of victims of high-risk investment scams more widely. The number of victims of boiler room fraud specifically could not be disaggregated from this total.