Everyone who’s seen the movie “Boiler Room” is familiar with how these operations work; for once, the film makers had no need to exaggerate. Real-life boiler rooms are run by unscrupulous con artists who hire cold callers to sell stocks and other securities to their naïve and unwary victims, using extremely high-pressure sales tactics.
The classic boiler room is run by a broker-dealer that claims to be independent, specializing in stocks chosen by their “analysts,” who, they say, have conducted extensive due diligence on the issues. In reality, the boiler room usually colludes with company management and/or insiders. Often they own large blocks of stock obtained at very low prices; sometimes they paid nothing at all. They will sell into their own promotion.
