Boiler room-style calls pushing the “next hot stock” are alive and well, according to an Investor Alert issued on Thursday by the Financial Industry Regulatory Authority.
According to FINRA, numerous consumers — particularly seniors — have contacted the regulatory agency complaining of receiving high-pressure phone sales calls urging them to buy penny stocks and other speculative investments.
“Unfortunately, some of those consumers sent — and lost — money,” FINRA says.
FINRA’s advice to help consumers avoid falling prey to a boiler room-style pitch include hanging up on the caller or simply not answering the phone at all. FINRA also discourages investors from making wire transfers or putting investment purchases on a credit card.
FINRA advises consumers to use the internet to check the validity of addresses, phone numbers and other information about the organization or individual.
“Cold calling can be a legitimate way for businesses to connect with potential new customers. But boiler room con artists don’t just take the tactic too far, some might in fact be breaking the law,” Gerri Walsh, senior vice president for FINRA’s Office of Investor Education said in a statement. “Aggressive pitches and repeated calling, coupled with promises of high returns, can signal a scam. If you receive a boiler room call, the best course of action is to calmly say no and hang up the phone.”
In its Investor Alert, FINRA gives several examples of recent boiler room scams it’s encountered.
1. In some cases, according to FINRA, callers use hard-sell tactics to pressure investors into buying shares that promise high returns on “can’t-miss” investment opportunities. FINRA says that repeated, and more aggressive, calls are common, and the investments touted are often low-priced “penny” or microcap stocks.
“Investors who purchase shares often find that the sales pitches are fraudulent and the shares they bought are virtually worthless,” FINRA says.
2. In other cases, according to FINRA, callers could purport to work for organizations that offer stock recommendations.