Two men were arrested yesterday in connection with a criminal investigation into a £5 million “boiler room” scam. The Financial Services Authority said the arrests came as a result of its investigation into Universal Management Systems, a company suspected of helping overseas boiler rooms that use high-pressure techniques to sell worthless shares to investors. The men have not been charged.

The arrests follow raids on addresses in North Yorkshire, Hampshire and Co Durham by local police forces, helped by the City of London Police.

The FSA began investigating Universal after allegations that overseas boiler rooms using “cold calling, high-pressure selling” techniques had instructed duped investors to make cheques payable to the company.

The regulator said that Universal and related organisations – GS Asset Management and Continental Administrative Services – sent more than £5 million of investors’ money overseas in a 12-month period.

The regulator has been cracking down on overseas boiler rooms and their agents, but this is its first criminal investigation. FSA sources indicated that as many as 800 UK investors had lost money through scams involving Universal and its affiliates.

Jonathan Phelan, head of retail enforcement for the FSA, said the arrests showed that the regulator “will not hesitate to use our powers to protect consumers, including launching criminal investigations”.

The FSA said that it has obtained orders freezing assets of up to £5.45 million relating to the investigation. News of the arrests comes a month after Margaret Cole, the FSA’s director of enforcement, pledged that the regulator would step up its efforts in the battle against financial crime.

Ian Mason, a former FSA lawyer, said the arrests were an encouraging sign that the regulator is following through on its promises.

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