Certain stockbrokers use high-pressure sales tactics to get investors to
invest in securities that may have significant risks the investors don't
Fast-talking brokers and enticing sales pitches convince many people to
invest in securities with high risks, low liquidity, or other aspects
that many investors don't understand and investors who lose money
because of these unscrupulous tactics may be able to recover damages.
Such tactics that deceive and mislead investors may be illegal, and often
violate Securities and Exchange Commission laws.
When unscrupulous brokers looking to make quick profits employ illegal,
high-pressure sales tactics to sell inappropriate securities to unwitting
investors, they may face steep penalties under federal or state laws,
as well as FINRA violations. Industry rules prohibit brokers from using
any sales tactics that defraud investors; making untrue or misleading
statements; or engaging in any type of deceitful behavior. Common
high-pressure sales tactics include:
Brokers use manipulative language to convince investors to purchase securities.
Such language is often scripted beforehand to play on an investor's
strengths, weaknesses, and ego. Such manipulative sales techniques may
violate laws that reference manipulative broker practices.
To entice investors, brokers may pitch securities investments with guaranteed
low-risk returns, when in reality this doesn't exist. Under securities
laws and regulations, deceitful behaviors are a clear violation.
Pressure to Buy Blindly
Investors may be pressured to buy blindly by classic boiler room operations
that focus on long-distance cold-calling to make sales. In these situations,
brokers commonly omit important information about securities and use deceitful
sales practices. Omitting material facts when selling securities is a
clear violation of SEC Rule 10b-5.
Lies About Past Performance
To gain an investor's trust, unethical brokers may lie about their
professional track record in the securities market. Lies and misleading
statements about past sales, stock gains, and profits, and broker licenses
and credentials are often used to close sales with investors, especially
sales over the phone.
According to FINRA regulations, brokers must reasonably believe that a
recommended investment is suitable for an investor. Brokers that are cold-calling
new potential clients and pitching a one-size-fits-all security often
ignore what is best for the client. Recommending unsuitable securities
violates FINRA regulations and leads to broker penalties.
If you have been a victim of securities fraud, contact the securities litigation
attorneys at Meyer Wilson at 888-390-6491
for a free consultation.