Boiler Room Schemes
Many investors are familiar with depictions of stockbrokers in large rooms, talking loudly on the phone and hustling to close deals. Fewer people may be aware of the fact that in some instances, these so-called “boiler rooms” where brokers are encouraged to engage in fraud to trap investors are real. Boiler room schemes involve situations in which a broker or a team of brokers uses tactics to provide potential investors with only good information regarding a stock, while also discouraging them from doing any independent research about the opportunity. They also frequently make guarantees about the chance of returns, calling the investment a “sure thing” and insisting that the investor must act quickly or lose out on the opportunity. Los Angeles securities fraud lawyer Steve A. Buchwalter is ready to help investors pursue the compensation that they need after being burned by their brokers.Holding Brokers Accountable for Boiler Room Schemes
Boiler room schemes can be hard to identify because the brokers who use them usually have substantial experience when it comes to making a poor investment opportunity sound like a great deal. If you have any doubt as to whether or not a broker is attempting to convince you to invest in a questionable opportunity, you should obtain a second opinion or conduct your own research. One of the most common tactics that these brokers use is convincing an investor that the opportunity will expire quickly and that there is no time for you to do your own research. Brokers who are caught running boiler room schemes may be subject to substantial criminal liability, including charges of securities fraud, mail fraud, wire fraud, money laundering, theft, investment fraud, and violations of the RICO Act.
In addition to criminal prosecution, civil liability may arise in cases involving boiler rooms. This is because brokers owe their clients a fiduciary duty to inform them of all material facts and to act with candor, honesty, loyalty, and due care when providing financial advice and handling an investor’s money. Investors typically have substantially less knowledge when it comes to knowing how to make investments or how to evaluate certain opportunities. In fact, brokers rely on it. Boiler room schemes are clear breaches of this duty of care because brokers are trying to convince investors that a mediocre or poor investment opportunity is more lucrative than it actually is. They also discourage investors from doing any outside research, which a reasonable and prudent broker would be unlikely to do.
If a broker has engaged in a boiler room scheme, and the investor has lost money as a result, the investor may be entitled to recover the difference between the value of the investor’s account and the estimated value of the account had the fraud not occurred. The investor may also be entitled to recover interest, as well as any commissions or other fees that the broker may have charged in relation to the boiler room scheme. Calculating damages may be complex in these cases, so it is important to enlist an attorney who is familiar with the sophisticated financial services industry and can consult experts on your behalf.Consult an Experienced Los Angeles Lawyer for a Securities Fraud Claim
If you are an investor who has lost money as the result of a boiler room scheme, we are here to help. A financial blow struck by a broker’s dishonesty and self-dealing can be devastating. Los Angeles securities fraud attorney Steve A. Buchwalter has counseled and represented investors throughout Los Angeles, Orange, and Ventura Counties, including in Beverly Hills, Newport Beach, Santa Barbara, and Irvine. Call us at (818) 501-8987 or contact us online to set up a free appointment with a knowledgeable broker misconduct attorney in Southern California.