A search of this subject did not bring anything up.
I’m going to use the type of Boiler Room featured in the movie, “Boiler Room.” I understand the basic concept behind the idea. You have a room full of pushy salespeople/telemarketers selling bogus stock over the phone. The victims end up sending large checks to the company, thinking that they are buying legitimate stock in legitimate companies.
In the movie, Giovanni’s first “Big Fish” is a doctor. Vin steps in and closes the deal for him, I assume, because Giovanni wasn’t licensed yet to actually sell stock. Is this correct?
As far as I could tell, the stock for this particular company that Giovanni was selling was legitimate. I know that this is a sales technique, but Vin even put a limit on the amount of stock that the doctor could buy, lest this doctor is a “Piker.” So this had the aroma of being a legitimate business deal selling legitimate stock in a legitimate company. I guess the Boiler Room has to sell atleast some portion of good stock. Is this correct?
But later in the movie, Giovanni starts looking at the prospectus’ (?) of several of the company whose stock he’s selling.
First off, I have no idea what types of documents Giovanni was looking at. There were three (?) signatures on each document, and they all matched from document to document. He found this disturbing. Why? What was he looking at? What does it mean?
I’ve only sorta-seen the movie (on cable, and I was doing other things while it was on), so I can’t speak to the specifics. But I can tell you what a prospectus is.
In order to issue publicly traded securities, an issuer has to register the securities with the SEC. Part of that registration process is producing a prospectus, which is a document disclosing key financial and business information to potential investors. A company must provide a prospectus to investors so they can make an informed investing decision.
My vague recollection is that the Boiler Room guys were setting up fake companies, writing entirely fictional propectuses, and then doing a big “pump and dump” scheme. If the same signatures (presumably, signatures of the management of the “companies”) were on prospectuses for different companies that would be a big tip to Giovanni that something was up.
But I dunno; maybe someone more familiar with the movie can flesh out the details.