Police have arrested two men in the first criminal investigation into illegal share selling by City regulators, it emerged today.
UK investors could have been conned out of more than £5 million, the Financial Services Authority (FSA) suspects.
The pair were held as part of an FSA probe into so-called "boiler rooms", which illegally target customers with cold-calling to sell overpriced shares, before vanishing with the proceeds.
Wednesday's arrests follow an FSA investigation into Universal Management Services (UMS), which the FSA believes is taking payments on behalf of overseas boiler rooms. Around 800 investors have been affected so far.
The regulator launched the probe after consumer complaints of high-pressure selling tactics.
The FSA said it suspected that UMS - not registered as a UK company and unrelated to four other companies with similar names - had sent more than £5 million of investors' money overseas with the help of two other organisations.
UMS was processing payments on behalf of six known overseas boiler rooms, which fall outside the the FSA's jurisdiction.
The regulator has frozen more than £5.4 million in assets as part of the probe.
FSA investigators and four police forces including City of London Police raided addresses in North Yorkshire, Hampshire and County Durham to make the arrests, although no charges have been made.
Jonathan Phelan, the FSA's head of retail enforcement, said: "This is the first time we have taken this action and it shows that we will not hesitate to use our powers to protect consumers, including launching criminal investigations were appropriate."
Consumers who have been targeted by a boiler room can report information to the FSA online, or via its contact centre on 0845 606 1234.
They can also check if a company calling to sell shares authorised by the FSA or on a list of known unauthorised firms.