Rules of engagement for avoiding boiler room scams
You pick up the phone. Hello? Hello? Hello! Nothing at the other end but empty space. It could be:
o Your mother o A charity canvasser o Your local political candidate o A licensed investment advisor o A pollster o A boiler room shyster
That empty space at the end of the line probably means the call is being connected to a call centre. It could be at the other end of the country, or it could be half-way around the world. If you don’t hang up, then you’re on your way to talking to someone who wants to sell you something. If that someone is a boiler room shyster, he probably has a golden tongue, a sham investment, and only one thing in mind: separating you from your hard-earned savings as quickly as possible.
March being Fraud Prevention Month in Canada, we want you to know the rules of engagement for avoiding boiler room scams.
Rule 1: Hang up. If you’ve walked a fair ground midway or attended a fund-raising lunch, you know that once you start listening, your hand is already on your wallet.
Rule 2: If you don’t hang up, ask questions:
o Are you registered to sell ___ in Canada? To sell investments to you in Canada, a person must be registered by your local securities regulator, either directly or through the Investment Industry Regulatory Organization of Canada. A caller offering a real estate investment would have to be registered with a provincial real estate regulator or council.
o What is your name and the name of your firm? If you can’t get this information, hang up. No need to be polite. But if the caller gives it to you, you can look him or her up.
o What is your phone number? Tell the caller it’s your policy to do your own due diligence before buying any investment and that, if you’re interested, you will call him back after looking up his name/firm. If you can’t get this information—you guessed it—hang up!
Rule 3: If you think you’ve been called by a boiler room operation, report it. You may think that nothing will come of your effort, or that with nothing lost there’s nothing to gain by reporting. But boiler room operations are huge international businesses, and your tip could set off an investigation that could save thousands of others from losing their life savings.
Find out more about boiler room scams: Boiler room scams: Could you be vulnerable? How they work, what to watch for, what you can do to protect yourself. New from the Canadian Securities Administrators.
Lifting the lid on “boiler room” scams, The Guardian. Former boiler room employee tells it like it is.
Experienced investors are most common boiler room victims. Investor alert from the UK’s Financial Services Authority, includes first-person story by a boiler room victim
Boiler Room – the movie. Live the pain of being scammed without getting hurt by watching this cautionary tale.