A Boiler Room is a place or operation—usually a call center—where high-pressure salespeople call lists of potential investors ("sucker lists") to peddle speculative, sometimes fraudulent, securities. Sucker lists identify victims of previous scams. The Securities and Exchange Commission (SEC) defines a boiler room as "a place where unregistered securities are offered and sold through the use of high-pressure sales tactics." Boiler rooms often use aggressive cold calling techniques to contact potential investors who may be unaware of the risks associated with investing in these types of products. Many times, the investments being hawked by these operations are either highly risky or outright fraudulent.The SEC has taken action against many boiler rooms in an effort to protect unsuspecting investors from being scammed. In one recent case, for example, the SEC charged three individuals and two companies with operating a $30 million investment fraud scheme that targeted retirees living in Florida. According to the SEC's complaint, the defendants cold called potential investors and persuaded them to invest their life savings in penny stocks that were touted as "can't miss" opportunities. In reality, most of these stocks were worthless shell companies with no real business prospects. The defendants allegedly made false statements about their investment opportunities and also hid key information about their businesses from prospective investors. As a result of this scam, some retirees lost everything they had saved for retirement .The story above highlights some common characteristics of boiler room schemes: high-pressure sales tactics; unregistered securities; misrepresentations about investment opportunities; hiding key information from prospective investors; targeting retirees who may be more vulnerable to such schemes . By knowing what to look for, consumers can better protect themselves against becoming victims of this type of fraud .
