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The hearings showed that some brokerage firms promoting these securities target unsophisticated investors, many of whom have never invested before. The victims are often the elderly, who are more likely to be home when the phone rings, and fall prey to high-pressure telemarketing techniques, misrepresentations and manipulation.
Many of the firms that deal in these securities employ brokers who jump from one firm to another. It is not uncommon for these brokers to have a history of criminal convictions and an excessive number of customer complaints. Some of them, as was evidenced at the hearings, even work without being licensed.
Brokers often read scripts of sales pitches that even go so far as to contain prepared answers for any question or excuse that an investor might raise.While the use of a script is not illegal, it can often lead to serious fraud, involving misrepresentations, outlandish claims and guarantees. Such scripts are designed to lure in unsuspecting investors. One disguised ex-broker testified: "A high school drop out could sound like the Chairman of the Fed."
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