DEFINITION of 'Boiler Room'

A place where high-pressure salespeople use banks of telephones to call lists of potential investors (known as a "sucker lists") in order to peddle speculative, even fraudulent, securities. A boiler room is called as such because of the high-pressure selling.

BREAKING DOWN 'Boiler Room'

A broker using boiler-room tactics gives customers only positive information about the stock and discourages them from doing any outside research. Boiler-room salespeople typically use catchphrases like "it's a sure thing" or "opportunities like this happen once in a lifetime".

Boiler-room methods, if not illegal, clearly violate the National Association of Securities Dealers' (NASD) rules of fair practice. The North American Securities Administrators Association estimates that investors lose $10 billion a year - roughly $1 million an hour - to investment fraud promoted over the telephone.

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