Near the end of the 20th century, an investigator for the SEC described boiler rooms as follows,
“The brokers sat "cheek by jowl" in a room the size of a basketball court. All of their desks were lined up side by side in rows. The firm held mandatory sales meetings every morning at 8:30 a.m. at which time sales techniques were demonstrated and scripts for the firm's "house stock" . . . were distributed. Brokers were expected to follow the scripts and only give customers the information they contained.”
While the image of a boiler room has changed with the invention of the internet, the idea remains the same. A group of brokers create the demand for the stock where no actual market exists. They will attract buyers using high pressure sale tactics and coercive techniques taught to them by the firm. Once a buyer is on board, the stock shoots up giving the illusion of high demand, when in reality it is just a group of investors being talked into buying something they don’t want or need.
The following are telltale signs of boiler rooms:
- High pressure sales tactics
- Cold calls/ unsolicited calls from brokers
- Discouraged from doing outside research
- Only told good things about the stock, not bad
- Encouraged to make investment decision immediately
- Scripted sales answers
If you or someone you know suspect they are the victim of a boiler room and have lost money as a result of an investment, you may be entitled to compensation for you losses. Contact Fitapelli Kurta today to discuss the merits of your case at absolutely no cost to you.