Boiler Room Final

Impact on the Securities and Exchange Industry/Market & the Futures Industry/Market

The recent movie Boiler Room focuses on the phenomenon known as Boiler Rooms, also known as bucket shops or chop shops. Boiler Rooms are generally fraudulent schemes operated by high-pressure salespersons working out of "front" or boiler rooms equipped with many telephones, offering phony investment opportunities. In the film, Giovanni Ribisi's character plays one of these salespersons, one who lies and cajoles until somebody gets hurt. As one economic analyst said of the film "Boiler rooms are not very reputable trading firms that push the stocks of companies with a less than $300 million market cap, or micro caps. When it comes to the underbelly of the stock market, first-time director Ben Younger nails it" (Humer 1).

Long considered the underbelly of the stock market, Boiler Rooms more often have a deleterious impact on the securities and exchange and futures markets. The Securities and Exchange Commission (SEC) despises boiler rooms because their existence causes many consumers to complain to the SEC. Further, millions, and perhaps billions, of dollars have been lost by unwary consumers through boiler room futures investment schemes. In general, they create a black eye on the securities and exchange and futures markets, making consumer wary and hostile toward investment and causing more regulation and supervision of the industries by the federal government. This

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stors, executives, shareholders, and other market participants. Securities regulators and other prominent groups have estimated that securities and commodities fraud totals approximately $40 billion per year. The fraudulent schemes perpetrated in the securities and commodities markets can ultimately have a devastating impact on the viability and operation of those very markets. (Securities/Commodities 1) As crime levels continue to grow with the complexity and success of the securities and commodities markets, the FBI continues to have sole criminal investigative authority over all securities and commodities fraud related activity. In carrying out its mission, it works closely with the SEC, the Commodities and Futures Trading Commission (CFTC), the National Association of Securities Dealers (NASD) and others. The advent of the Internet and technology has only increased the ability for new types of investments and new types of fraud. In order to demonstrate how securities and commodities fraud orchestrated from boiler room operations impacts the markets, we only need to look at a recent example where the State Securities Commission of New York withdrew Wall Street Management's (WSM) securities license. In the typical, pa

Category: Economics - B