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