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

What do high-pressure sales tactics in boiler room operations often lead to?

1. Long-term client relationships

2. Legitimate investment opportunities

3. Pump-and-dump schemes

4. Informed investment decisions

The correct answer is: Pump-and-dump schemes

High-pressure sales tactics in boiler room operations create an environment where investors are rushed into making decisions without fully understanding the risks or details of the investments being offered. These tactics exploit the urgency they generate to push individuals into purchasing stocks, frequently ones with little or no fundamental value. Pump-and-dump schemes are a direct result of this approach. In such schemes, operators artificially inflate the price of a stock (the "pump") through misleading or aggressive marketing and then sell their own shares at the heightened price. Once the operators sell off their holdings, the stock price typically collapses, leaving new investors with significant losses as the value drops drastically. This manipulation is characteristic of boiler room operations, where the primary objective of the fraudsters is to profit at the expense of unsuspecting investors. In contrast, the other options, like long-term client relationships, legitimate investment opportunities, and informed investment decisions, do not accurately reflect the outcomes associated with the aggressive tactics used in boiler rooms. These strategies tend to undermine trust and genuine investment opportunities, leading instead to financial harm for unsuspecting investors.