Boiler Room Schemes
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Fifth part.
"Boiler-Room" Scams or
"Cold Call" Investment Scams
Boiler-rooms are high-pressure phone sales operations from which sales people call to promote abusive and fraudulent deals.
Overseas boiler-rooms may make use of various telecommunication facilities to maintain "virtual offices" in Singapore to create a false impression that they are based in Singapore. For example, they will use the services of business centres which provide mail, fax and phone forwarding services to wherever their operation is actually based. They may also open bank accounts in Singapore to receive remittances. The monies are usually quickly repatriated elsewhere.
1. How to spot Boiler-room operations?
(a) High-Pressure Sales
Tactics Boiler-room operators make cold calls to potential investors and persuade them to buy the recommended stocks through long and, haranguing phone calls. Very often they give promises of high returns, deflect questions and use psychological ploys to trick people into buying stocks they know nothing about or do not really want. To keep up the pressure, boiler-rooms will often supplement their telephone calls with faxes, spam e-mails or direct mail-outs containing bogus stock research reports, stock tips or profiles of their sham brokerage or investment advisory firms.
(b) The "Three-Call" Technique
Some cold callers wait before turning up the heat. They will first build your trust by introducing about their services and track record. In a subsequent call, they will tell you about a fabulous deal. In a third call, they will urge you to "buy now" or miss out.
(c) Bait and Switch
Dishonest brokers may lure new customers by introducing well-known, widely traded "blue chip" stocks. Subsequently, they will introduce investments in small, unknown companies with little or no earnings. These stocks tend to be very risky and thinly traded, leaving more investors with losses than profits.
(d) Unusual arrangements for collecting funds from investors
Some operators may use commercial overnight courier services or even send a courier to pick up the cheque from you. No matter what collection method is used, the purpose is the same: Not to give customers enough time to back out of sending money.
(e) Micro-cap Stocks
Boiler rooms usually get investors to invest in stocks of foreign companies with low capitalization ("micro-cap stock"). They may recommend stocks in exotic fields like environmental engineering, bio-technology, medical research or high technology to make the investment sound exciting and more attractive to investors.
They may claim to be connected with insiders from these micro-cap companies, or involved in the companies' promotion or are the market makers of the stocks, which they will buy and sell for their own account. Boiler room operators will encourage investors to buy on the basis of information they provide over the phone, through their faxes, e-mails, or mail-outs. They may also claim that the stocks are traded in the "over-the-counter" (OTC) market in US and quoted on OTC systems to give investors a false sense of security in buying the shares.
Often, investors do not fully understand the risks involved in OTC stocks. OTC stocks are NOT listed and traded on NASDAQ or recognised stock exchanges and are not subject to the same stringent reporting requirements of the recognised exchanges. Information on these micro-cap companies is difficult to obtain. Although some bulletin boards or quotation bureau may publish prices of the OTC stocks, purchases and sales are made with market makers. These stocks tend to be low priced and trade in low volumes.
(f) Paying Too Much
Unknown to investors, the boiler-room operators may themselves hold stock in a company they are promoting. They sell that stock to investors when its price peaks at the height of the buying frenzy. The boiler-room operators may also use the Internet to spread rumours in chat rooms and on bulletin boards to attract investors to buy their recommended stocks. After investors put in the money, the stock price will usually fall sharply, as there will no longer be demand or support for the company's stock.
(g) Finding It Hard to Sell
Many investors find that once they buy the "recommended" stock, they can't get what they paid for, even if they decide to sell right away. Or they find that their brokers simply would not sell the stock at all. Some brokers just become uncontactable.
(h) "Double Whammy"
Some boiler-room operators will hit an investor twice by posing as another "broker", after the investor's first "broker" disappeared. They may pretend to help the investors to sell stocks that the first "broker" sold to the investor, on the condition that the investor buys another stock or pays additional sums.
2. How to deal with Cold Calls?
(a) When hounded by high-pressure tactics, hang up. Remember you are in control. You do not have to entertain the caller if you do not want to.
(b) Avoid making a hasty or immediate decision. Get written information first about the firm, the salesperson and the investment. Verify the information independently through credible sources and seek professional advice if necessary. A list of firms licensed to deal in securities in Singapore is available at the website of the Monetary Authority of Singapore at www.mas.gov.sg.
(c) Avoid giving out information on your credit card, bank account number or any personal particulars over the phone to strangers.
3. Lodging a complaint
Investors should exercise caution before parting with their money. It is often too late to recover any monies by the time they find out about the scam. If you have received dubious cold calls for investment and would like to report the matter, we would like to hear from you.
Write to us telling us:
the name and address(es) of the cold calling company
the name of the person who called or contacted you
dates when you were contacted
securities offered to you/bought by you
how much money you sent and when and where you sent it
if the company has been taken over or been taken over by any other businesses, and
what documents you have been sent.
You may also like to refer to the websites of the following foreign regulators on the subject of boiler rooms or cold call investment scams:
Australian Securities & Investments Commissions @ http://www.asic.gov.au
Securities Futures Commission in Hong Kong @ http://www.hksfc.org.hk
Thailand Office of Securities and Exchange Commission @ http://www.sec.or.th
Financial Services Authority in United Kingdom @ http://www.fsa.gov.uk -
My company uses the same tactics..
Grabbing and yelling for a closer!
CLOSER!
It's like deja vu watching that film. -
Its like telemarketing isnt it, except the deals are usually investments in phony stuff?Originally posted by Lingos:My company uses the same tactics..
Grabbing and yelling for a closer!
CLOSER!
It's like deja vu watching that film. -
Yeah.. selling cartridges. hahahha...Originally posted by laurence82:Its like telemarketing isnt it, except the deals are usually investments in phony stuff?
Laurence.. that is like my office man!
The closers walk around like top dog sh|t.
In fact someone adopted the alias .. guess what?
Jim Young. HAHAHAHah.. -
Ok lah, cartridges at least what a lot of people want.Originally posted by Lingos:Yeah.. selling cartridges. hahahha...
Laurence.. that is like my office man!
The closers walk around like top dog sh|t.
In fact someone adopted the alias .. guess what?
Jim Young. HAHAHAHah..
What annoy me are those "Hello, you have won a prize, by buying our products you can blah blah..." or "You have been specially selected due to your HP numbers to attend blah blah.."
I said no, and the bloody bugger has the cheek to be rude! Wonder how she got my information in the first place. -
Can understand. Have you heard one is from talent agency? Using the same tactics and no matter what type of face, size,etc,etc, they "die die" want you to go down for interviews.Originally posted by laurence82:Ok lah, cartridges at least what a lot of people want.
What annoy me are those "Hello, you have won a prize, by buying our products you can blah blah..." or "You have been specially selected due to your HP numbers to attend blah blah.."
I said no, and the bloody bugger has the cheek to be rude! Wonder how she got my information in the first place.
& also those from street interviews with the same tactics.