In business, the term boiler room refers to an outbound call center that sells questionable investment over the phone. This usually refers to a room where salespeople work using unfair and dishonest sales tactics, sometimes selling penny stocks, private placements, or direct stock fraud. This term has negative connotations, and is often used to imply high pressure sales tactics and, at times, poor working conditions.
Video Boiler room (business)
Business structure
The classic image of the boiler room is that it has an undisclosed relationship with the company it promotes, or an undisclosed profit motive to promote the company.
Once an insider investor exists, boiler space promotes (via phone calls to a brokerage client or spam email) this thinly traded stock where there is no actual market. Brokers in the boiler room actually "create" the market by attracting buyers, whose demand for stocks to raise prices; this gives the company owners enough volume to sell their shares for profit, a form of pumping and disposal operations where the original investors make a profit at the expense of investors taken by boiler room operations.
In the 20th century, the US Securities and Exchange Commission described the boiler room as follows:
The brokers sat "side by side with jowl" in a room the size of a basketball court. All of their tables were lined up in rows. The company held a mandatory sales meeting every morning at 8:30 am when sales techniques are shown and scripts for the company's "stock house"... are distributed. Brokers are expected to follow the script and only give the customer the information it contains.
Some properties of the boiler room include only providing good news about the stock to be sold, and discouraging outside research by customers or brokers working there.
Maps Boiler room (business)
Etymology
The term may come from cheap office space, hastily arranged for use by such companies, often just a few tables in the basement or utility room of an existing office building, with "heat" and "pressure" from close range and tactics sales quickly analogous to the conditions in the boiler and, in the previous case, the surrounding space.
In the early 1970s (and possibly before), boiler room was a term used by political parties for a room with many phones used to summon prospective voters.
Modern boiler room
In the late 1960s to the 1980s, boiler rooms sold local bonds to unsophisticated investors. These boiler spaces are located mainly in the southeastern United States, especially Memphis, Tennessee, and then Little Rock, Arkansas. The operator gets the nickname "Bond Daddies." Operators will sell bonds at inflated prices, change different bonds, mislead investors about risks, or fail to deliver bonds to investors.
In the 1990s, organized crime in New York City was involved in a Microcap stock scam using boiler space.
Although many disappeared in the 1990s after the explosion of "dot-com bubble", much of the boiler room still operates worldwide. The reduction in telecoms expenses means that a company can operate in one country while calling potential investors in another. The advantage of such an operation is that the company can operate without fear of the demands of the original legal system of the investor. For example, many boiler rooms that contact potential investors in the UK operate from Spanish cities like Barcelona and Valencia.
Boiler room operations are also exemplified by the case of Fort Lauderdale-based First Resource Group LLC company accused by the US Securities and Exchange Commission by fraudulent space schemes in 2012. According to the SEC, First Resource and Stern use boiler room sales phones to make claims which are boosted and deceived investors while manipulating stock prices and making profits for themselves.
With the advent of the internet and the ability to create websites easily without regulatory engagement, as well as the ability to operate from other jurisdictions, the boiler room continues to operate into the 21st century. It is easy for fraudsters to create websites in one country, operate from another country and target victims in a third country, hide their identity and make it difficult to track them down. Financial regulations vary significantly from country to country, and some countries are deliberately promoting low regulatory environments to attract financial businesses. This facilitates the boiler room to use this to their advantage. The financial regulatory authority in each country has significant difficulties in enforcing rules about frauds in other countries. With low financial literacy by investors or victims (especially in the increasingly complex way that global financial markets operate), and without better coordination between financial regulators in different countries, the boiler room continues to operate.
Gold Coast boiler room scam
The Gold Coast has been described by investigators as an investment fraud capital in Australia, with many boiler room operators selling fake investments and sports betting schemes to Australian and overseas customers. The Australian Crime Commission estimates Australians have lost at least AU $ 113 million through 2012.
Fraudulent operators purchase old shelf companies without a history of complaints to give their appearance has been traded legally for a long time. When a complaint causes reputation problems, they close the company and start a new one. Virtual offices, fake receptionists, and fake testimony are used, and telemarketers call victims with misleading claims about high returns. The victim said the bet and investment software was not working and they lost money when the company suddenly closed. In 2011, private investigator Ken Gamble, acting on behalf of the victim group, provided millions of dollars of deceitful evidence to the Queensland Police Service, but said the investigation team failed to investigate. At the end of 2014 it was announced the Queensland Crime and Corruption Commission has taken over investigation of some Gold Coast boiler room scams because of alleged fraudsters receiving police protection.
In popular culture
A fictitious "boiler room" brokerage firm dramatized in the 2000 Boiler Room movie, and Glengarry Glen Ross drama and film shows similar boiler room operations selling real estate. The 2013 movie The Wolf of Wall Street, starring Leonardo DiCaprio, also involves boiler-room investment business and is based on memoirs of the convicted penalty swindler, Jordan Belfort. A 2010 episode of the White Collar television series depicts the fictitious fraudor Neal Caffrey who infiltrated a group of corrupt brokers who are also peddling penny stocks that are on the rise.
See also
- Cart shop
- Foreign exchange fraud
- Microcap share fraud
- Pumps and remove
- Stock dilution
References
- Foot Records
- Common sources
External links
- SEC - "Portrait of the Boiler Room"
- FCA (English) - "Share fraud"
- Motley Fool consumer website - Boiler Room FAQ
- It's Money - "English court stops boiler room fraud"
- The Guardian - "Lifting the lid on the 'boiler room' fraud"
- BBC - "Boiler room fraud"
Source of the article : Wikipedia
0 Comments