how a boiler room operates
according to the securities and exchange commission sec the people involved in a boiler room scheme reach out to investors through cold calls which are unsolicited calls to people with whom the salesperson has had no prior contact this tactic positions the prospect to have no frame of reference or history from which to measure the caller s claims while this means the prospect has no reason to trust the caller it also means they have no background information to disprove their claims 2the sec advises investors to research the backgrounds of investment salespeople and verify their registered status at its website investor gov part of the pressure sales approach may include making assertions about the investment opportunity that the target cannot verify on their own the salesperson might insist on immediate payment by the prospect they may also take a hostile approach threatening the prospect to act promises of high returns and no risk might also be used to pressure prospects to invest boiler room tactics are sometimes used to convince investors to overspend on the purchase of securities that are actually of lower value the securities may in fact be worthless or nonexistent and the funds that are raised are solely for the enrichment of the individuals behind the operation a variety of fraudulent scams may be run through boiler room schemes this can include binary options fraud advance fee fraud and microcap fraud these schemes are no longer limited to basements and boiler rooms they can be maintained at a variety of locations such as offices or private homes boiler room salespeople may also solicit prospects through other means than phone calls electronic messaging such as email text messages and social media can be used to initiate contact with a prospect 