If you have ever watched a movie about Wall Street, you are likely familiar with the concept of a boiler room: a bunch of salespeople sit in a room full of phones, putting on the hard sell on unsuspecting individuals in order to get them to buy into risky investments. Of course, these salespeople do not mention the risk involved – in fact, if they do mention it, they downplay it – and they keep pushing until the person on the other end of the line feels like they have no choice but to invest.
Although boiler rooms may make for intriguing Hollywood plot lines, in real life they often leave investors suffering from catastrophic losses. These boiler rooms rely on high-pressure sales tactics for a reason: If investors knew the truth about the investments they were being sold, they would never agree to hand over their money. While boiler room scams have waned in recent years, the Financial Industry Regulatory Authority (FINRA) recently issued an alert warning that boiler rooms may once again be on the rise.
5 Warning Signs of a Boiler Room Scam
As outlined in FINRA’s Boiler Room Alert, the following are all potential warning signs of a boiler room scam:
- Receiving unsolicited calls from someone who uses hard-sell tactics to try to get you to buy shares in a “low risk” or “can’t miss” investment opportunity.
- Receiving calls from “investment advisors” or “account executives” offering low-priced stocks in companies that are supposedly poised to reap substantial profits.
- Receiving calls from someone who claims to be a registered investment advisor or have an affiliation with a major brokerage firm, but who in fact is not licensed or registered.
- Being pressured to “act now” in order to avoid missing out on a potential investment opportunity.
- Being asked to send money in the mail or provide your credit card information without first receiving any type of documentation to set up an account.
FINRA also warns that sophisticated boiler room scams will often use fake Caller ID information so that it appears you are receiving a call from a legitimate brokerage firm. But, legitimate firms will assign an investment advisor to call you out of the blue and pressure you into an uninformed investment. If you do not know the person who is calling you, you should not give them money to invest on your behalf.
So, what should you do if you receive a call from a boiler room? The Senior Vice President of FINRA’s Office of Investor Education recommends, “calmly say no and hang up the phone.”
What to Do if You Suffered Investment Losses in a Boiler Room Scam
If you purchased stock over the phone resulting in substantial losses, it may not be too late to recover your investment. At Zamansky LLC, we represent individual investors nationwide in securities arbitration and litigation. A securities fraud attorney has decades of experience representing aggrieved investors, and if you lost money in a boiler room scam, Zamansky LLC can act quickly to help you recover as much as possible.
For more information about what we can do to help, contact us to arrange a free, confidential consultation. Call (212) 742-1414 or tell us what happened online and schedule an appointment with one of our experienced attorneys today.