South Florida Arbitration & Litigation Lawyer Blog
Precious Metals Boiler Rooms:
Historically, “Boiler Rooms” were associated with securities and commodity futures trading. Generally, a “boiler room” is defined as a place where high-pressure salespeople use banks of telephones to “cold” call lists of potential investors (known in the trade as sucker lists) in order to peddle speculative, even fraudulent investments. Generally, as part of the sales pitch, the caller initially relies on sales scripts based upon false and misleading information. If that does not work, it is not uncommon for the sales person to just make facts up with no knowledge as to whether what is being said is in fact true.
This post is being provided for education purposes only. It is not designed to be complete in all material respects. Thus, you should not rely upon this post as providing legal or investment advice. If you have any questions, you should contact a qualified professional.
For the most part, regulators have been able to shut down most securities and commodity futures boiler rooms. However, infrequently, you will read about another boiler room being shut down leaving in its wake a path of financial destruction for those individuals that were sucked in.
Recently, boiler rooms have made a come back in the precious metals area, especially by firms offering or pushing the use of leverage. Many of these firms were and are located in South Florida. Consequently, this post will focus on what is transpiring in the South Florida area.
In Florida, there are generally no licensing requirements that these firms currently have to satisfy to act as an introducing broker or a clearing/counter-party firm other than obtaining a telemarketing license from the Florida Department of Agriculture, if the firm is involved in telemarketing activities. Each precious metals firm and its telemarketers are supposed to file an application and obtain a license, from the state, whether the cold calls are to be made within or without of the state.
These applications will provide you with some basic information about the firms and their telemarketers and, if scripts are to be used in the calls, you can request a copy of the scripts. However, our experience has demonstrated that many times all of the scripts that are actually used are not filed with the state. For example, we just came across a situation where there was an objection book prepared and distributed to all of the brokers, which contained a rebuttal script for any major objection that a proposed customer came up with. The applications, licenses and scripts can be obtained from the Florida Department of Agriculture through a Freedom of Information Act request, which can be made on line.
In subsequent post relating to precious metals, we will provide you with information concerning how many of these companies actually work both pre and post Dodd Frank.