Boiler Room: An unflattering term used to describe a fraud scheme in which salespeople are hired to call unsuspecting individuals and push investment opportunities.

“Boiler rooms” that use high-pressure tactics to lure investors to buy stocks have become a worldwide problem, with operations identified in areas as far-flung as southeast Asia and Africa. Trying to close these operations, which commonly cold call potential investors and use fraudulent methods to push overpriced stocks, is a challenge because they can set up shop virtually anywhere and are hard to track.

Boiler rooms, a term that refers to the kind of makeshift offices these operations often use as their base, have been a focus of U.S. authorities for years. They involve brokers who refuse to say anything negative about the stocks they push and make baseless predictions about how much the shares are likely to jump.

One problem in monitoring the schemes is that the deceptive brokerages may hold themselves out as legitimate firms that are set up in one place but in fact are operating out of another locale. Southeast Asia and Africa are two regions where such activities have been identified, as well as in parts of Europe such as the UK and Spain.

International Organization of Securities Commissions (IOSCO), an umbrella organization for the world’s securities regulators, whose group promotes international cooperation among securities regulators, is pressing roughly half of its more than 100 member countries that have not yet signed a 2002 memorandum of understanding on sharing information. Most countries in the larger financial markets, including the United States, the UK, France, Germany, Japan and Australia, have signed the memorandum.

This entry was posted on Monday, February 11th, 2008 at 7:43 pm and is filed under Africa, Asia, News, Personal Finance, The Greed Wagon, Wall Street. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.