Boiler room (business)
From Wikipedia, the free encyclopedia
The term boiler room in business refers to a busy center of activity, often telemarketing or other types of sales. It typically refers to a room where tele-marketers work, often selling stocks, and using unfair, dishonest sales tactics, sometimes selling fraudulent stocks. The term carries a negative connotation, and is often used to imply high-pressure sales tactics and sometimes, poor working conditions.
A boiler room usually has an undisclosed relationship with the company being promoted or undisclosed profit from the sale of the house stock they are promoting.
A boiler room promotes (via telephone calls to brokerage clients or spam email) thinly traded stocks. The boiler room usually holds a large position in the stock and plans to dump it on brokerage clients at a high price.
The boiler room usually has close ties to or the same owners of the company whose stock is being promoted.
Some traits of a boiler room include presenting only good news about the stock to be sold, and discouraging outside research by customers or brokers working there.
They often use phrases such as:
- "opportunities like this happen once in a lifetime"
- "it's a sure thing"
- "our brokerage has inside information that something big is about to happen with this stock"
The term is likely to have originated from the cheap, hastily arranged office space used by such firms, often just a few desks in a the basement or utility room of an existing office building. The term is a fitting analogy due to the secretive nature of these firms, the connections with the company they are promoting and the high-pressure nature of their activities.
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"The Boiler Room and Other Telephone Sales Scams" by Robert J. Stevenson was published by The University of Illinois Press, Chicago, IL., in 1998 (hardcover) and in 2000 (paperback). It is a sociolocial study (a covert ethnography) of white-collar crime in telephone sales operations.
