Beware of Boiler-Room Style Calls

By Kristen Barros

With decades worth of Securities and Exchange Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”) warnings, boiler room-style scams have nonetheless been a successful tactic used by many scamming brokers. These calls consist of a surprise phone call by a broker with a high-pressure sales pitch urging customers to invest in different products such as penny stocks and other high-risk investments. Techniques are used to rip off consumers and investors, particularly seniors. According to FINRA, an elderly couple was persuaded into purchasing “nearly $900,000 worth of virtually worthless microcap stocks.” FINRA also uncovered another scammed senior investor who “purchased more than $500,000 of a microcap stock while on the phone with the caller.” These scams are costing investors serious amounts of money and it is important to know when you, as an investor, are being victimized. Here are some common characteristics of boiler room scams:

  • Big promises: The caller is promising high returns on investments you simply “can’t miss out on.”
  • Repeat calls: The caller may be calling you repeatedly, each time getting more aggressive and convincing.
  • Penny stocks or microcap stocks: These are just some of the most common boiler room scam sales offered along with some other high-risk investments.
  • “Stock Recommendation” Organization: Most of these scams are from organizations that are not even registered with FINRA. They use fake names and other false information to appear to be a reputable firm. It is important to use FINRA’s BrokerCheck to verify every caller.
  • Pumping-and-dumping: This is when victims are pressured into purchasing stocks to pump up the stock’s value.
  • Supposed Account Executives: The caller may claim to be an account executive who really got your information from a website you may have visited previously.

These are just some ways to figure out if you are being boiler room scammed but it is most important to know what to do when you are actually being scammed. First off, never say yes. Even if what the caller claims seems appealing or plausible, always say no. These callers know what they are doing and have been trained to give the most believable sales pitches, negating any sense of possible doubt. Second, do not give these callers a second chance. It is always easier to just hang up after you have established the first call was a scam.  After the first call, you will most likely get called again to follow up. Third, never give your credit card information out to any caller. The callers mission is to obtain all your card information or set up a wire transfer to complete the investment. Don’t fall into their trap (even if they ask for checks). A legitimate brokerage firm will have specific policies in place to complete transactions and rarely ever request immediate fund transfers. Lastly, and probably most importantly, use FINRA’s BrokerCheck to check investment advisors and brokers. This is an easy way to be sure about who is contacting you and whether they are legitimate.

These risks are real and senior citizens are continuously being targets. If you or anyone you know has sent money over the phone, recently, you must act quickly to rectify any possible damage done. Many credit card companies or financial institutions are willing to help you stop payment. For more tips on boiler room-style scams, visit the FINRA website at