Personal Finance

Learning the Tricks of the Boiler Room Trade

Harry's * first telephone solicitation came more than a decade ago when a seemingly amiable caller offered him the opportunity to invest about $20,000 in a medical clinic. He decided to take that opportunity, and then lost everything. Thus began a cycle of losing money to boiler room investment fraud.

The 70-year-old Washington-state rancher lost money in that medical-clinic venture. Still, he took another chance. He invested thousands more in an Arizona gold mine following a telephone offer promising him he would strike it rich.

That investment didn't pan out either, and he again lost his money. Undeterred, Harry took another chance and invested in a Texas oil well after a lengthy phone call with a man who claimed to be a veteran. He saw a few dividend checks over three or four months, and then the checks stopped coming.

Related: If You Get a Call Like This, Don't Bite-and Don't Buy

Altogether, Harry believes he has lost an estimated $500,000 from fraudulent investment offers he received over the phone.

"I come from the old school where you actually trust people," said Harry, who is not married and has few close relatives.

Then one day he received a different kind of pitch. This one was part of a public-service campaign that educates the public about boiler room investment scams and the tactics used by those who make those calls day in and day out.

Related: Avoiding Investment Scams

Harry soon realized he wasn't alone in being targeted again and again by investment con artists. Many think they would not be susceptible to such scams, but the truth of the matter is fraudsters are masters of persuasion, tailoring their pitches to match the psychological profiles of their targets. They look for an Achilles heel by asking seemingly benign questions-about your health, family, political views, hobbies or prior employers. Once they know which buttons to push, they'll bombard you with a flurry of influence tactics, which can leave even the savviest person in a haze.

This new type of call helped teach Harry how to spot the "tricks of the boiler room fraud trade." Now, thanks to the call center's efforts, Harry is turning the table on con artists as a "Fraud Fighter."

Harry still gets plenty of cold calls. But he now shares information about financial fraud pitches that he receives with a network of "Fraud Fighter Call Centers" run by the AARP Foundation and the National Telemarketing Victim Call Center (NTVCC). Funded by the FINRA Investor Education Foundation (FINRA Foundation) since 2012, these call centers have reached more than one million consumers with key investment fraud prevention messaging.

Arming Fraud Fighters

The call centers use a "reverse boiler room" approach, in which trained volunteers proactively call consumers-particularly those most at risk of investment fraud, like Harry-to warn them about fraud and arm them with the tools they need to resist persuasive calls from con artists. Volunteers provide direct fraud prevention counseling and indirect counseling in the form of a scripted voicemail. It was a routine call from a peer counselor at one of these Fraud Fighter Call Centers that reached, and helped, Harry.

"We're actually taking the tactics the scammers use, and we are using them for good," said Amy Nofziger, Director of Regional Operations for the AARP Foundation.

The call centers identify and reach out to victims of fraud or those who meet the profile of a financial fraud victim sometimes found on so-called "mooch lists," which are often sold and resold among multiple con artists looking for their next score. The lists feature detailed information about the potential victim's finances and personal interests, as well as any past scams they've invested in.

The goal of the Fraud Fighter program is to help those contacted to hear, retain and recall messages about the importance of dealing with from registered professionals and buying only registered investment products.

While fraud trends to be underreported, FINRA Foundation research shows that financial fraud solicitations are widespread. In the study, more than 8 in 10 respondents reported having been solicited to participate in a potentially fraudulent offer, and 11 percent reported losing a significant amount of money after engaging with the offer. Further, an estimated $50 billion is lost annually to consumer financial fraud in the United States, according to the Stanford Center on Longevity.

Education in Action

Direct education on fraud risk behaviors, social influence tactics and prevention strategies-such as asking questions and checking registration status of financial professionals and investment products-can reduce fraud susceptibility.

"Partnerships with organizations like the AARP Foundation and NTVCC are critical to the Foundation's investor protection work," said FINRA Foundation President Gerri Walsh. "Together, we are able to leverage our resources to reach a much broader audience with important fraud prevention information."

Los Angeles-based NTVCC staff volunteer Anna Mills has recruited about 20 fraud fighters like Harry. Harry alone forwards an average of 30 different suspicious investment opportunities each month to Mills, who subsequently contacts the appropriate enforcement agencies.

"He is the voice and helper of seniors," Mills said. "He's really doing important work. He has helped to put people in prison."

As a fraud fighter, Harry coaxes con artist callers into providing vital pieces of information-their names, location and other details that can be passed along to federal and state law enforcement agencies for investigation and prosecutions. Mills also created an email account that she monitors that Harry directs the callers to use.

"I feel confident that he will not get involved with these guys. He is not vulnerable," Mills said. "I trust that he will not give these people money."

And Harry hasn't.

"It's kind of a hobby, and hopefully someone won't lose their money," Harry said. "If you're not sure, don't take their calls and don't take their information."

You too can become a fraud fighter by reporting potential scams. To reach the AARP Fraud Fighting call centers, call toll free 1-877-908-3360. To contact the NTVCC's Fraud Fighting call center in California, call toll free 1-855-322-9218. If you think an investment pitch might be a scam, check out FINRA's Scam Meter .

* The subject's real name was not used to protect his privacy.

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FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry - brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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