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Boiler-rooms are high-pressure phone sales operations by salesmen who may make repeated calls offering the sale of shares investments in third party businesses.
Boiler-room operators maintain websites to give victims the impression that their operation is proper. Overseas boiler-rooms sometimes create a false impression that they are based in Singapore by using Singapore telephone numbers which are routed to their overseas locations. Likewise, business centres in Singapore are used to forward mail, fax and phone calls to the boiler-room operators based in another country. They use local bank accounts to receive payments from victims and the monies are quickly transferred to overseas bank accounts.
Boiler-room operators make cold calls to potential investors and they use high pressure sales tactics to persuade them to buy the shares they recommended. Often they make promises of extraordinary profit at little or no risk, deflect questions and use various ruses and misrepresentations to induce people into buying shares they know nothing about or do not really want. To keep up the pressure, boiler-rooms operators will often supplement their telephone calls with faxes, spam e-mails or direct mail-outs containing bogus market research reports, shares tips or profiles of their sham brokerage or investment advisory firms.
Some boiler-room operators wait before turning up the heat. They will first build your trust by introducing their services and track record. In a subsequent call, they will tell you about a fabulous deal as their recommended shares have the potential to appreciate significantly in the near future. In a third call, they will demand for an immediate decision to purchase their recommended shares. Boiler-room salesmen want you to act fast before you have a chance to develop second thoughts or consult with a professional for advice. You may be told that many deals will be "gone tomorrow," "sold out today" or have "just one of two remaining openings."
Dishonest brokers may lure new customers by introducing well-known, widely traded "blue chip" shares. Subsequently, they will introduce investments in small, unknown companies with little or no earnings. These shares tend to be very risky and thinly traded, leaving investors with more losses than profits.
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.
Boiler rooms usually get investors to invest in shares of foreign companies with low capitalisation (micro-cap stock). They may recommend shares 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 shares, 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 shares 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. However, unknown to investors, the shares recommended to them usually have very low levels of investor interest and are difficult to dispose of subsequently.
Unknown to investors, the boiler-room operators may themselves hold shares in a company they are promoting. They sell shares 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 shares. After investors put in the money, the share price will usually fall sharply, as there will no longer be demand or support for the company's shares.
Many investors find that after they buy the "recommended" shares, they can't get back their money. They find that their brokers simply would not sell the shares or the brokers are uncontactable.
Some boiler-room operators will hit an investor twice by posing as another "broker", after the disappearance of the first "broker". 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 of money.
When hounded by high-pressure sales tactics, hang up. Remember you are in control. You do not have to entertain the caller if you do not want to.
Avoid investments you do not understand. The greater your degree of ignorance, the greater is the chance that you will be swindled. Do not make an immediate decision. Get written information about the firm, the sales person, and the investment. Verify the information independently through credible sources and seek professional advice if necessary.
Avoid giving out information on your credit card, bank account number or any personal particulars over the phone to strangers.
To protect your interest, deal only with persons regulated by the Monetary Authority of Singapore (MAS). The names of regulated persons in respect of the provision of financial services under the Acts administered by MAS are listed on the MAS website at:
http://www.mas.gov.sg
MAS also maintains an Investor Alert List maintained at:
http://www.moneysense.gov.sg/check_our_list/Consumer_Portal_IAL.html
The Investor Alert List contains a list of entities which are possibly conducting activities regulated by MAS without authorization. Please take note that the list is not exhaustive.
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. To lodge a complaint, please click here.
Kindly include the following information: - The name and address(es) of the cold calling company;
- The name of the person who called or contacted you;
- The dates when you were contacted;
- The securities offered to you or bought by you;
- The amount of money you sent, when and where to;
- Whether the company has been taken over by any other businesses; &
- The documents which you have received.
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| Last updated on 18 May 2007 |
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