Brian Smiley comments in New York Times article about cold calls from brokers.
The first call is a warm-up.
“Hello, is this Mr. Joe Smith? Joe, this is Sally Script with Wannamakabuck Investment Bankers in New York. Joe . . . (pause) before I go any further, I want you to relax. I’m not calling to sell you anything today.“My firm has been quite successful in its recommendations. In fact our last issue sold out in only —-! In fact, I’m finding it quite easy to open new accounts because of them.”
Wall Street’s professional script readers may not know a debenture from a dividend, but they are masters at baiting consumers into buying shares of companies that have little or no promise. The material quoted above is from a script used at one of Wall Street’s boiler rooms — although the fictitious Wannamakabuck name was substituted because the provider of the script asked that the firm’s name not be published.
The script picks up again in a second call known in boiler room operations as the “sizzle” call. That’s the one that’s supposed to leave you panting to write a check to Wannamakabuck. “We don’t have anything for you right now,” goes the second call, “but timing is everything in the stock market, so I’m checking to see if you’re ready.
“To insure that I’m looking in the correct area for you, let me say that most of my clients fall into one of two categories, either $8,000 to $15,000 or $20,000 to $40,000. Which of these two ranges suit your investment needs?”
The third call comes in for the kill: “I told you I would call you back when something great came up. Well, it came up. Do you have a pen handy?”
Securities regulators had hoped that cold calling with rote scripts would die down after new rules for stocks under $5 a share began to kick in last spring. But the practice of hyping low-priced stocks appears to be alive and well: to get around new rules that restrict cold-callers, some scam offerings are priced above the $5-a-share mark.
Earlier this month, Massachusetts filed a complaint against the New York-based brokerage firm of Hibbard Brown, where brokers were said to have been told to memorize and use “word for word” a deceptive three-step script to woo customers.
So important was effective script-reading, the complaint said, that job applicants were auditioned for those skills during interviews.
The Securities and Exchange Commission and self-regulatory organizations like the National Association of Securities Dealers do not prohibit use of scripts when brokers go telephone prospecting for new customers. “There is nothing wrong with cold calls per se,” said John Pinto, executive vice president for compliance at the N.A.S.D. “But we certainly do object when people use these scripts to sell securities, as opposed to saying “I’m with XYZ broker-dealer and let me send you some information.”
The reality, however, is that when a broker uses a script, it is usually to snare an investor in a scam. “Most of the scripts that we’ve seen are things that we would find objectionable,” Mr. Pinto said.
When Hibbard Brown was peddling shares of Site-Based Media, a company that supplied an “innovative video-advertising system for installation in supermarkets and checkout lanes,” according to the script, potential investors got a breathless pitch that stressed urgency.
“I just broke from a special situations meeting with our top analysts,” the script began. Site-Based was a stock that “could lead you up the road to financial independence,” it went on, never mentioning that the company’s chairman had been convicted of wire fraud and that its finances were a disaster.
Investors who hesitated were warned against delay. “Waiting will only mean picking up the stock at a higher price,” said the script, which was used in August 1991, when Hibbard was selling shares at $2.25 apiece. Site-Based had fallen to $1 a share by December 1992, and closed at $1.375 yesterday.
Along with utterly deceptive descriptions of companies’ prospects, some brokers also work with scripts that map out the precise words to use when an investor tries to say “no thanks.” In Hibbard’s case, if an investor said he or she had no cash on hand, the broker suggested liquidating certificates of deposit and other assets in order to pay for Hibbard issues, the Massachusetts complaint said. Hibbard even suggested that prospects use credit cards to pay for securities.
Other firms have urged investors to take out home equity loans to buy shares, said Brian Smiley, a lawyer at Page & Bacek in Atlanta.
If investors rightly request a little something in writing — some financial background wouldn’t be a bad idea — brokers scoffed at their foot-dragging. “Why isolate a timely situation and then not act on it while we mail things back and forth,” went one script for Hibbard. “That’s not the way to make money.”
If a prospect managed to find out something negative about the financial performance of a company and objected on those grounds, the script instructed brokers to say: “That’s not important here. What we’re buying is the future, not the past.”
And if the prospect said he had never heard of the company, the Hibbard script’s response was: “They’re not a household name yet. We buy the future, not the past. I sure wish I had McDonald’s 25 years ago.”
If all else fails, scripts instruct brokers to resort to humiliating their prospects. When a male prospect tells a script reader that he’d like to consult with his wife, brokers sometimes tell him to put his wife on the phone “so I can talk to the person who wears the pants in the family.”
A good script writer leaves little to a broker’s imagination.
By Susan Antilla
