– Know Your Rights
The telephone rings
as you’re sitting down to dinner or putting the kids to bed.
A stranger is selling something. It’s known as “cold calling.”
For many businesses, including securities firms, cold calling
serves as a legitimate way to reach potential customers.
But sometimes serious trouble and financial losses await you at
the other end of the line. You may be pressured to buy a
bad investment. Or the investment might be a scam.
Whether the calls
are annoying, abusive, or downright crooked, you can stop
cold callers. This Alert tells you how to stop cold calls,
what your legal rights are, which red flags to avoid, and how
to evaluate any investment opportunity that comes your way over
Use the “National
Do Not Call Registry” to Reduce Unwanted Cold Calls
The National Do
Not Call Registry was jointly established by the Federal Trade
Commission and the Federal Communications Commission to give Americans
a way to avoid getting telemarketing calls at home. Adding
your home or cell phone number to the Registry is easy — and absolutely
free. You may register two ways:
at donotcall.gov, as long as you have
a working email address. Shortly after you sign up, you
will receive an email confirmation from donotcall.gov that contains
a link you must click to complete the process. If you
do not click on this link within 72 hours, your phone number
will not be registered.
- Over the
telephone by calling toll-free 1-888-382-1222 from
the number you wish to register.
Your number will
remain on the Registry for five years — or sooner if you decide
to terminate your phone service or take your number off the Registry.
sure to sign up for the National Do Not Call registry every
five years. Your registration will expire five years from
the day you register, so you’ll need to place your number back
in the Registry after the expiration date to limit cold calls.
Be aware that putting
your home phone or cell phone numbers on the National Do Not Call
Registry will not stop all telemarketing calls. You still
may receive calls from:
- Political organizations,
charities, and telephone surveyors.
- Companies with
whom you have an established business relationship. Under
Financial Industry Regulatory Authority (FINRA) rules, an established
business relationship includes making a financial transaction
or having a security position, money balance or account activity
with the firm within the past 18 months. A securities
representative may also call you for up to three months after
you’ve contacted the firm to ask about a product or service.
- Companies you
have provided express written permission to make telephone contact.
- If the caller
is a family member, friend, or acquaintance, they also may still
including people from the securities industry, call to sell you
something, they must follow these important rules:
Must Check the “National Do Not Call Registry” — With very
few exceptions, federal law requires all telemarketers, including
securities firms, to search the National Do Not Call Registry
every 31 days to avoid calling any numbers that are on the Registry.
Cold Callers May
Call You at Home Only Between 8:00 a.m. and 9:00 p.m.
— These time restrictions for calls at home apply unless
you have an established business relationship with the firm or you
gave the firm express written permission to call you at other times.
Cold callers may call you at work at any time.
If your number has been on the Registry for 31 days and you
receive a cold call from an entity that doesn’t meet any of
the exceptions to the cold calling rules, you can file a complaint
at donotcall.gov or by calling toll-free 1-888-382-1222. You’ll
need to know the date of the call and the company’s name or
phone number to file a complaint.
Must Say Who’s Calling and Why — Cold callers must promptly
- Their name
- Their firm’s
- Their firm’s
address or telephone number
- The purpose
of the call — for example, to sell you an investment or investment-related
ID Tip: If you have Caller ID activated on your phone, you
should be able to tell when a telemarketer is calling.
The Federal Communications Commission requires telemarketers
to transmit Caller ID information. Telemarketers may not
block their numbers.
of Cold Callers — Cold callers must also:
- Put you on
their “Do Not Call” list, if you ask. Every securities
firm must keep a “do not call” list. If you want to stop
sales calls from that firm, tell the caller to put your name
and telephone number on the firm’s “do not call” list.
If anyone from that firm calls you again, get the caller’s name
and telephone number, note the date and time of the call, and
complain to the firm’s compliance officer, the SEC, the FINRA,
or your state’s securities regulator. Further below, you’ll
find information on how to make a complaint.
Once you’re on a firm-specific do-not-call-list, neither
the firm nor any of its employees are allowed to call you—even
if there is an established business relationship.
- Treat you
with respect. Cold callers can’t threaten, intimidate,
or use obscene or profane language. They can’t call you
repeatedly to annoy, abuse, or harass you.
- Get your
written approval before taking money directly from your bank
accounts. Before investing, you should always get answers
to the questions below and written information about the investment.
If you do decide to buy from a cold caller, do not give your
checking or savings account numbers to the broker over the phone.
Brokers must get your written permission -- such
as your signature on a check or an authorization form -- before
they can use money from your checking or savings account to
fund your investments.
- Tell you
the truth. People selling securities must tell you
the truth. If they don’t, brokers violate federal and state
What Are Signs
Cold calling is
used legitimately to find clients for the long term. These
callers ask questions to understand your financial situation and
investment goals before recommending that you buy anything.
Unfortunately, not everyone has your best financial interest at
heart. Watch for these signs of trouble:
sales tactics. Aggressive cold callers speak from persuasive
scripts that include retorts for your every objection.
As long as you stay on the phone, they’ll keep trying to sell.
And they won’t let you get a word in edgewise.
- Pitches that
stress “once-in-a-lifetime” opportunities. Watch out for
someone who tells you about a “once-in-a-lifetime” opportunity,
especially when the caller bases the recommendation on “inside”
or “confidential” information.
- Callers touting
companies with “breakthrough technologies.” These
technologies often play of legitimate technologies, but at the
same time sound just a little too good to be true.
- Callers who
refuse to send you written information about the investment.
This is a form of manipulation designed to force a quick decision.
You should be able to receive information about an investment
and take as much time as you need to review it.
- Calls from
unregistered and unsupervised salespersons. Cold-calling
“brokers” and their bosses may not be properly registered to
sell securities—and often operate in an environment completely
devoid of required supervisory procedures. You can verify
whether the caller is registered to sell securities by using
What Else Can
When cold callers
use harassing, abusive sales tactics and lie to you about investment
opportunities, they violate the cold calling rules and break federal
and state securities laws. Don’t let them off the hook!
- Report abusive
cold callers. You can file a complaint with the SEC,
FINRA, your state’s securities regulator or the FTC:
Securities and Exchange Commission
Investors may file a complaint electronically at the SEC
Investor Complaint Center or call or fax:
Phone: (800) 732-0330 (toll-free)
Fax: (202) 772-9295
Investors may file a complaint electronically at the FINRA
Investor Complaint Center or call or fax:
Phone: (240) 386-HELP (4357)
Fax: (866) 397-3290
Your State’s Securities Regulator
Investors may file a complaint electronically at the North
American Securities Administrators Association (NASAA) Complaint
Center or call:
Phone: (888) 846-2722 (toll-free)
You may file an online complaint at http://www.donotcall.gov/ or call:
Phone: (888) 382-1222 (toll-free)
- Tell intrusive
cold callers not to call again. If you’re annoyed
by cold callers, stop them before they start their sales pitch.
Put your name on the National Do Not Call Registry—and inform
the cold caller your name is on the list. Tell the caller to
put you on the firm’s “do not call” list. If anyone from
that firm calls you again, complain to the firm’s compliance
officer, the SEC, FINRA and your state’s securities regulator.
- Don’t warm
up to intrusive cold callers. Cold callers often try
to “warm up” potential customers with flattery or friendship.
They might try to put you off guard by chatting about your hometown
or the local sports team. Or they might suggest they’ve
spoken with you before. Don’t fall for their tactics.
And don’t feel compelled to be polite or stay on the line.
You don’t have to listen if you don’t want to, and you don’t
have to tell cold callers about yourself or your finances.
Say “no, thanks” or “I’m not interested” -- and then hang up.
Don’t wait for the caller to end the call. YOU are in
control and can hang up at any time.
What If I Want
Never buy an investment
based simply on a telephone sales pitch. A wise investor
will always slow down, ask questions, get written information
about the investment, and investigate the background of the firm
and broker. Take notes so you have a record of what the
broker told you, in case you have a dispute later. Before
making a final decision and handing over your hard-earned money,
take the time to investigate. Follow these steps:
- Check out
the firm and broker. Use FINRA
BrokerCheck to learn about the professional background,
registration/license statuses and conduct of FINRA registered
firms and their registered brokers.
- Call your
state’s securities regulator. You’ll find contact information
for your state securities regulator on NASAA’s
- Is the investment
- Is the broker
licensed to do business in my state?
- Have you
received any complaints about the broker pushing the investment
or the broker’s firm? Does either have a disciplinary
- Have you
received any complaints about the stock, the company, or
the company’s managers?
- Ask your
broker these questions:
- Is the investment
registered with the SEC and the state securities agency
where I live?
- How long
has the company been in business? Is it making money?
If so, how? What is its product or service?
Have the people who are managing this company ever made
money for investors in the past? Will you send me
the latest reports that have been filed on this company?
How can I get more information about this investment?
- Where does
the stock trade? How can I get information about the
stock’s trading price? How easily can I sell?
What price would I get if I decide to sell immediately?
- How does
this match my investment objectives? What is the risk
that I could lose the money I invest?
- What are
the costs to buy, hold, and sell this investment?
- Do your own
research. Get as much written information about the investment
as you can. Ask for a prospectus, annual report, offering
circular, and financial statements. Commercial Web sites
or your local library may have resources that provide additional
information about the company, such as lawsuits, liens, or recent
credit reports. Compare the written information to what
you’ve been told over the phone. Watch out if you’re told
that no written information about the company is available.
If that happens, contact the SEC, FINRA or your state’s securities
- Get a second
opinion. Talk to a trusted financial advisor or your attorney.
Consider calling another firm for a second opinion on the opportunity.
- Monitor your
investment. If you decide to invest, watch your investment
closely. Make sure your broker sends you account statements
and written confirmation of all trades. Read these documents
carefully to make sure they are correct. Be alert for
any transactions you did not authorize.
are rules governing cold calling. It pays to know them — and don’t
hesitate to take action in the event the caller does not abide