Attorney for Victims of Boiler Room Stockbroker Sales

State and Federal securities regulators, together with FINRA’s Department of Enforcement, have been instrumental in closing many of what may be characterized as boiler room operations. However, more instrumental in closing these firms has been their inability to pay or satisfy arbitration awards against them by their customers. As these firms are closing, or forced out of business by regulators or regulatory actions against their principals, some of which have been charged with criminal conduct in recent years, the brokers migrate or “cockroach” to a new firm, where the same conduct generally continues. Many of these firms, over the years, have had impressive sounding names like AS Goldman or Royal Hutton.

However, do not be fooled. Most often these firms are thinly capitalized and are generally owned or controlled by individuals with a shady past and a history or association with rogue brokerage firms where they received their training. The federal securities laws and self-regulatory rules technically only require firms in some instances to maintain a net capital of as low as $5,000. SIPC insurance generally only covers custody of customer funds or securities. Fidelity bond coverage is usually minimal and only protects against actual theft. Neither cover investor fraud or sales practices claims.

Broker-dealers are not required to maintain errors and omissions insurance to satisfy customer claims. Even where sometimes such insurance exists, the insurance company may deny coverage for a variety of reasons. Generally, customers defrauded by most boiler rooms, even if they act quickly, may soon find they have no likely source of recovery.

The Boiler Room Cold Call

Most boiler room cases begin with a “cold-call.” Someone you do not know calls you to sell you investments. Sometimes, customers get these calls because their name is on a “leads list,” or a customer list of some defunct brokerage firm where someone may have had an account that gets passed around from broker to broker as these brokers migrate from brokerage firm to brokerage firm.  Investors on this list, often referred to as a “suckers list,” will be called repeatedly by other firms employing the same sales tactics.

Most often, the cold-caller, or broker may purport to be part of a major Wall Street investment banking firm, often located somewhere on Long Island, and the broker may claim that their firm has special investment information or investment research, or only offers its services to large institutions, but is doing you a big favor, because you are a savvy investor.

Generally, these calls start out as merely introductory. These calls most often include the stockbroker touting the performance of past recommendations. Customers may be told which companies the firm is watching or recommending to its “best” customers, Recommendations, at least generally initial recommendations, are limited to generally credible large-cap, Fortune 500 type companies.

However, once the account is opened, and the assets are gathered, these recommendations generally always involve, or devolve into selling the high brand name recognition securities to purchase some low priced, obscure house stock, off-shore gambling venture, or some start-up pharmaceutical company. Whatever the story, there is a story. Whatever the stock, generally, these firms and their brokers as part of an underwriting, warrant conversion, unrelated large seller, proprietary inventory, or simply as a result of their market making activities, may have a large undisclosed financial interest in these securities, and a large financial interest in their sale to customers, often as principal with large undisclosed mark-ups and trading profits.

Boiler Room Stockbroker Fraud Persists

Generally, these investments turn out to be worthless, but generally, before they become worthless, the broker will trade low priced securities in your account, often without pre-authorization, until your account is worthless.

Many of these same brokers, many of whom have been associated with a laundry list of expelled or disciplined firms, migrate to new firms, these firms are expelled, and like pirate jumping a sinking ship to join another band of pirates, the migration or “cockroaching” continues.

Some of these brokers from expelled firm that lack a history of customer complaints, may move to the larger independent firms, where they are given their own offices, where they pay their own expenses, including the cost of insurance, and to avoid the scrutiny associated with the sale of low-priced securities, but using the same deceptive sales techniques, sell variable annuities or thinly traded fixed income securities, REITs, or Unit Investment Trusts, with large commissions, and other often non-disclosed fees.

Our Attorneys Represent Victims of Stockbroker Boiler Room Sales

If you have been the victim of aggressive boiler-room sales tactics, consult with an attorney.  Unpaid arbitration awards among these firms and individuals abound.  If not shuttered by regulators these firms are generally rendered insolvent from investor arbitration claims.  Non Attorney Representatives are known to use these same lists to solicit “up-front” fee and expenses from unknowing investors to chase otherwise insolvent boiler room broker-dealers.  If you have been the victim of boiler room fraud and high pressure sales tactics, contact us for a free confidential evaluation of your claim, by an actual lawyer at (877) SEC-ATTY.


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AboutNicholas Guiliano, Esq.

Nicholas J. Guiliano has more than 25 years of securities related experience, and has represented more than 1,000 public customers in claims against brokerage firms for fraud in connection with the sale of securities principally in arbitration before the Financial Industry Regulatory Authority (“FINRA”) Dispute Resolution, Inc. (formerly known as The National Association of Securities Dealers (“NASD”) Dispute Resolution, and the New York Stock Exchange (“NYSE”) Department of Arbitration.