Boiler Room

Boiler room is an unflattering term used to describe a place of business where high-pressure telemarketing tactics are used to solicit sales. A boiler room is most often associated with stock brokerage firms. A boiler room may rely on aggressive cold calling to sell risky stocks to willing investors. A boiler room may use sales methods that violate National Association of Securities Dealers (NASD) rules requiring brokers to recommend investments that are appropriate to an investor's portfolio. For example, a broker working in a boiler room might try to sell very speculative stock to a retired investor whose portfolio cannot endure such high risk. Boiler room brokers may also try to create investor interest in non-existent companies to profit from the sale of fraudulent shares. The term boiler room is derived from an industrial area that houses steam boilers.