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The arrests are part of the FSA's first criminal investigation into "Universal Management Services" (UMS) which it believes has been helping boiler room activities.

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.

High pressure selling 

On Wednesday, FSA investigators, City of London police and local police forces searched several addresses in North Yorkshire, Hampshire and County Durham and arrested the two men. The search and arrest warrants were obtained by the FSA, using its power to prosecute offences under the Financial Services and Markets Act 2000.

The FSA's investigation into suspected criminal offences by UMS followed complaints of cold calling and high pressure selling from consumers, told by known boiler rooms to make cheques payable to UMS.

The FSA discovered that in a 12 month period UMS, together with related organisations GS Asset Management and Continental Administrative Services, sent more than £5 million of investors' money overseas. The FSA has also obtained orders freezing assets of up to £5,450,000 relating to this investigation.

Jonathan Phelan, head of retail enforcement at the FSA, warned investors to be cautious when they are cold called by any firm promoting or offering to sell shares and to check first whether the firm is authorised by the FSA."

The FSA said that no one has been charged at this stage in connection with the ongoing investigation.

Related links

• Financial Services Authority