How To Avoid 'Boiler Room' Scams
By David Kuo (TMFDragon)
August 1, 2005
Despite vigorous efforts by regulators to stamp out 'boiler room' scams, investors are still being pestered by high-pressure telesales tactics. The trouble is, boiler rooms can be located anywhere in the world, and are usually well away from the jurisdiction of local law enforcement agency. So what should you do if you are contacted out of the blue by a convincing telesales person about money-making opportunities?
The best advice is to hang up immediately! Boiler room operators are renowned for their persuasive sales techniques, so unless you are immune to the hard sell it's best not to even engage in polite conversation. What's more, if a boiler room salesperson thinks you may be the slightest bit interested, they will phone you repeatedly until they make a sale.
Another ploy may be to put your receiver to one side and carry on with whatever you are doing. Eventually, the person on the other end of the line will get the message that they have been rumbled.
Personally, if I have time, I like to fish for as much information as possible. I try to find out who they are, and that includes their name, telephone number and address. But don't get too impressed by their titles. Almost everyone boiler room operator is either a Senior Vice President or a Senior Dealer! By and large, though, you may find that boiler rooms are very evasive, and won't tell you very much.
Also find out if they are registered with the Financial Services Authority. Remember, if an organisation is not registered with the regulator then you are will have no recourse if anything goes wrong later on. That goes for businesses registered outside the UK too! You can easily check if they are telling the truth here.
Listen to what the person has to say, and note it down carefully. (If you have a recording device attached to your phone then all the better.) The sales pitch can be very slick, but this is simply because it is nothing more than a well-rehearsed script.
If you find any flaws in their pitch then don't hesitate to point this out! Generally, after you have digested what they have said, it will boil down to fatuous claims of "guaranteed" profits. This may be because a company is "on the brink" of making a major announcement, or that a celebrity may be investing shortly! Their advice will undoubtedly be to for you to act swiftly before word gets out! However, that is the worst thing you can possibly do.
As a parting thought, if you are ever contacted by a boiler room, just ask yourself why they would contact you if the investment was that lucrative! If you are that lucky, then perhaps you should by a lottery ticket instead.
There's more about scams here, here and here. |
