Post on 14-Jan-2016
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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
Seth – • Casino• Greedy?• Wants to
impress dad
Boiler Room Questions
1. What is going on? Sumthin’ ain’t right.
Michael – Owner of JT Marlin
How can he afford to pay such huge RIPS?
Job Interview:Unprofessional?
Are Seth’s co-workers ethical?
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.
Med Patent IPO = BIG BUCKS
Get info for FBI to save dad
Will raid the building
Lie to Michael and say Harry’s a whale to get Harry the MED PATENT
IPO
Doesn’t trust Seth and wouldn’t sign off on an
IPO sale
Must get Harry’s IPO sale signed off on by a senior broker so he can cash out
on huge profits