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

What do boiler room salespeople generally sell?

1. Penny stocks

2. Real estate investments

3. Government bonds

4. Options and futures

The correct answer is: Penny stocks

Boiler room salespeople typically focus on high-risk investments, often targeting less experienced investors. Penny stocks, which are shares of small public companies that trade at low prices, align closely with their selling tactics. These stocks are often illiquid and can be subject to manipulation, making them appealing for boiler room operations that aim to generate profits through aggressive sales techniques and misleading information. The nature of penny stocks allows for high commissions for the salesperson, which incentivizes the aggressive selling tactics typically seen in boiler rooms. These tactics may include cold calling potential investors with exaggerated claims about the stock's potential gains, often without a legitimate basis for these claims. While other investment options, such as real estate investments, government bonds, and options and futures, can also be sold in unconventional or aggressive methods, they do not embody the same characteristics associated with boiler room operations. Real estate investments generally require more substantial capital and are not typically conducive to the high-pressure sales techniques of a boiler room. Government bonds are regarded as safer investments, thus attracting a different type of investor who is less likely to be pursued by boiler room tactics. Options and futures also involve a higher level of sophistication and risk awareness, which can deter the typical target audience for boiler room scams.