Boiler Room

Boiler rooms operations are nothing but share scams. The stock operator will sell worthless shares at inflated prices to investors that are impossible to sell. (seems like a script from "Not a Penny More, Not a Penny Less", doesn't it?)

Here's how it works :

1. A broker, usually operating from an overseas firm, will cold call an investor and propose they buy shares in a particular company.

2. To avoid being ill prepared for the nosy web-savvy investor, the share would usually have been ramped on online message boards.

3. The company they are share dealing in will probably be - a) listed on an illiquid market or, b) could be a small, unquoted company that the broker claims is planning to list

4. So, one of two things will happen - a) the shares cannot be sold as there is hardly a market for it or, b) the company will not exist at all and the broker is simply selling shares in thin air before taking the money and running (extreme case)

The firms operate from boiler room 'hotspots', such as Spain, Switzerland, Dubai, Japan, Bermuda etc. They will always have a listed address and a grand sounding name to give an air of legitimacy.

These are called 'boiler room' scams because of the highly pressurised sales technique employed by the broker. They can be forceful, persistent and highly aggressive. A common tactic is to create a sense of urgency about a stock, such as telling the investor it will explode any day so they need to invest quickly.

Additional resource : The boiler room boys are back with a new 'bargain' (here)