boiler room terms series 7 = broker license wood = a weak sale a whale = big rich guy a rip = a...
TRANSCRIPT
BOILER ROOM TERMS
Series 7 = Broker LicenseWood = A weak sale
A Whale = Big Rich GuyA Rip = A Broker’s CommissionIPO = Initial Public Offering for
stock
The SEC forbids a broker from recommending stock that would personally benefit him/her or his/her company. Why do you think that this is illegal?
STEP ONE• The owner of JT
Marlin creates a company, on paper with his friends.
• They file all the required SEC documents.
• They even rent a building for an actual address.
Step Two
• The brokers convince people that the fake company is a great investment.
• They create a buzz: “This company is about to release a new drug…”
• The IPO stock will start at less than a dollar,• BUT as soon as people start buying, it will drive the
price up to $10 even $20.
Step Three• The huge RIPs
encourage all brokers to push the stock, which creates higher and higher prices (increase demand).
• The early investors, which are mostly the fake owners, cash out their stock when it reaches $10 a share.
• Early investors get VERY rich.
Step Four• Eventually, since there is
no actual company, the stock will be seen as weak and will drop back down to zero (no buyers).
• Late investors will lose everything.
Step Five
• If the SEC catches on, you shut down the company and leave no traces.
• The SEC may not chase or investigate a company that no longer exists.
• Open a new “Boiler Room” in another location and start the process over.