Sponsored Content – While tactics may have changed, “boiler room” operations are still used to pitch dubious investment schemes, says Christine Kieffer of the FINRA Investor Education Foundation.
Typically run as outbound call centers, boiler rooms target retail investors with highly speculative—often fraudulent—investments. In addition to phone calls, today’s boiler rooms also rely on messaging apps and social media to contact potential investors.
Regardless of the method of contact, the scammer’s goal is the same: Use high pressure tactics and persuasive language to convince investors to purchase specific investments that will ultimately enrich the scammer.
Red Flags of a Boiler Room Scam
The Unsolicited Pitch. If you’ve previously shown interest in higher risk investments or been victimized by a scam, the promoter might have found your name on a lead list (sometimes called a “mooch list”). Ask yourself, why would they share this opportunity with you rather than keep it to themselves?
The Hard Sell. Scammers often try to pressure investors into buying shares on “can’t miss” opportunities, painting a picture of wealth from an investment and claiming time (or product) is scarce. Be aware that boiler rooms frequently pitch speculative investments for which limited information is available.
The Unlicensed Promoter. Callers might claim to work for organizations that offer stock recommendations. However, the organizations often aren’t registered with FINRA, associated with any FINRA-registered firm, or involved with any legitimate business entity. Callers might use fake names and credentials, disguise their phone number, or create a new website to appear more credible.
The Pump and Dump. Fraudsters sometimes engage in manipulative trading to create the illusion that the stock is on an upward trend and starting to gain traction. This could be a sign of a “pump-and-dump” scheme.
How Can You Protect Yourself?
If you’re suspicious about someone giving you unsolicited investment advice or promoting a particular investment, report your concerns to FINRA, the SEC, and your state securities regulator.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. Under the oversight of the U.S. Securities and Exchange Commission, FINRA regulates one critical part of the securities industry—brokerage firms doing business with the public in the U.S. For further information on protecting your money or to file a tip or complaint, visit www.FINRA.org/MoneyShow.
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