Certain stockbrokers use high-pressure sales tactics to get investors to invest in securities that may have significant risks the investors don’t understand.
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
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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.
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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.
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