Legal Definitions - boiler room

A boiler room is a type of telemarketing operation where salespeople make unsolicited phone calls to potential investors in order to convince them to invest in a particular stock, service, or product. The salespeople often use deceptive tactics to persuade people to invest, such as making false claims, exaggerating the value of the item, and downplaying the risks involved. They may also pressure potential investors to make a quick decision without doing any research.

For example, a boiler room might call someone and tell them that a certain stock is about to skyrocket in value, even though there is no evidence to support this claim. The salesperson might also tell the person that they need to act quickly in order to take advantage of this opportunity, even though there is no real urgency.

Boiler rooms are illegal in many countries, including the United States. The Securities and Exchange Commission has rules in place to prevent broker-dealers from engaging in deceptive practices, and the Penny Stock Reform Act requires penny stockbrokers to disclose certain information to potential investors. However, some boiler rooms operate outside of the country they are targeting in order to avoid legal consequences.