Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What is the primary tactic used by boiler room salespeople?

1. Encouraging long-term investments

2. Promoting high-risk, low-reward stocks

3. Urging investors to buy house stocks

4. Providing detailed market analysis

The correct answer is: Urging investors to buy house stocks

The primary tactic used by boiler room salespeople revolves around urging investors to buy specific stocks, particularly those that are often referred to as "house stocks." This strategy involves aggressive sales pitches that typically lack transparency and aim to create a sense of urgency among potential investors. Boiler room operators often promote stocks in which they hold a significant interest, or that provide them with high commissions. House stocks are usually associated with the firm’s own offerings, which improves the chances of immediate sales for the broker. This technique contrasts sharply with encouraging long-term investments, as the focus in a boiler room environment is usually on making immediate sales rather than building sustainable investment strategies. Promoting high-risk, low-reward stocks could occur, but it is not the primary tactic; rather, the emphasis is on pushing for a quick buy-in. Providing detailed market analysis is also not characteristic of boiler rooms, where sales strategies rely more on high-pressure tactics and persuasive implications rather than comprehensive and objective information for investors.