Beware the Cold Call

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By Selena Maranjian (TMF Selena)
April 16, 2002

Q. What can I do about cold-calling stockbrokers?

A. You've got a cold call on your hands when a broker you don't know calls you out of the blue, usually interrupting your dinner, to urge you to buy some security.

If you're going to deal with any cold-calling broker, first do a little digging. Check out their regulatory background by calling NASD Regulation's Public Disclosure Hotline.

If you've already had a run-in with a cold caller from the dark side, report the incident. You can do so by calling the SEC at 202-942-9634 or visiting their website. You can also contact the North American Securities Administrators Association (NASAA) and ask for the contact information for your local securities regulator.

Here's some NASD guidance on how to deal with cold callers (you can complain about unscrupulous ones there, too). The Securities and Exchange Commission (SEC) also offers some good guidance on the topic.

  • You don't have to accept these calls. You can just say you're not interested and hang up. You can also ask to be put on any firm's "Do Not Call" list.
  • Cold callers should introduce themselves, promptly offering their names, the name of the firm they represent, their firms' addresses and phone numbers, and that they're calling to sell you something.
  • Cold callers should not threaten or frighten you, and shouldn't be annoying you by calling again and again. They should be polite.
  • Be very concerned if they're using high-pressure sales maneuvers. Don't believe that you "Must act today!" Be extremely skeptical of any "once-in-a-lifetime opportunity" and any "guaranteed" returns, especially very high returns.
  • A cold caller should be happy to send you written information on any investment that they recommend.

If you think all this is a lot to remember about cold callers, you can just remember these two words:

Hang up.

That's right. If a cold-calling broker really has a valuable stock to offer, he or she wouldn't have to sell it by persuading strangers to buy it. People would be snapping up shares on the open market. Stocks that cold callers try to sell are often ones that no one else wants, that their firm is trying to unload.

Here's an amusing Fribble on cold calls penned by a Fool Community member. And here's another one, for good measure.

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This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.