Boiler Rooms in Stock Fraud Swindles and BoilerRoom Investment
The heart of a fraudulent telemarketing operation is usually a "boiler
room," a rented space with desks, telephones, and experienced
salespeople who talk to hundreds of people from across the country
In a typical investment-related boiler room the "brokers" (
registered reps ) may sit crowded together in a room with long
tables with up to seven phone stations per table. The firm likely
holds mandatory sales meetings every morning at which time sales
techniques are demonstrated and "scripts" for the firm's "house
stock" are distributed. Brokers are expected to follow the
script and only give customers the information it contains. They
are discouraged from doing any outside research, and are told to
rely on the firm's research and representations.
After the morning sales meeting, the reps are expected to spend
the entire day on the phone. The firm expects a high volume of
sales, and if brokers do not stay on the phone, they are fired.
One registered rep told an examiner that he made 250 calls on a
good day; 70 on a bad day. All of his calls had been previously "qualified" by
an unregistered cold caller.
Many telemarketing firms utilize a monitoring process which randomly
tape-records the sales conversations of its telemarketers and they
are made aware of it. This acts as internal policing for the company
to ensure that no incoming cheques are misdirected from the main
Overseas Boilerroom Investments
Today, con artists see that investors are paying increasing attention
to overseas investment opportunities so a new generation of scams
has also gone international. Most troubling is a growing pattern
of former U.S. boiler room operators who have moved their telephone
sales operations outside the U.S. and Canada to Hong Kong, the
Bahamas, Thailand, Panama, Costa Rica, Europe, Liberia, and even
The locations of the boiler rooms are carefully chosen, with
con artists dialing out of countries that may have no extradition
arrangements with our domestic law enforcement agencies.
There are also differing views among nations about what are acceptable
market activities. For example, the London Stock Exchange does
not ban "bear raids" in which speculators try to drive
down the price of a stock through short selling, a practice which
is sharply limited under New York Stock Exchange Rules.
In some countries, including Italy, Sweden, Belgium and Taiwan,
there exist few prohibitions against insider trading. Greece and
Kenya are among the nations with no government agency to safeguard
the interests of investors by guarding against marketplace misconduct.
Boiler Room Expose - special series by Christopher Carey
Stock Watchers - site which Monitors
the Stock Scam Boiler Rooms
Articles on Boiler Room Scams.