Cold Calls Burn

Has this happened to you? You're engrossed in your favorite TV show, only to receive a phone call from a broker you don't know who urges you to invest in something. This is a "cold call." A classic broker cold call might inform you that you're among the "lucky few" to be offered a "surefire investment." You might even be guaranteed "a 200 percent return within six months!"

Don't become a cold-call victim, as many do. Understand that promises of high returns for low risk are likely to be broken. Scoff at warnings that you have to "act now!" Any good investment should still be around tomorrow. Avoid "inside" tips, because it's illegal to pass on or act on material that is inside information. Steer clear of anyone unwilling to provide details in writing. Beware of predicted or "guaranteed" profits.

If a cold-calling broker really had a valuable stock to offer, he or she wouldn't have to convince 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, stocks that their firm wants to unload. This applies to initial public offerings (IPOs), too. Shares of IPOs that people are excited about tend to be hard to come by, not aggressively hawked over the phone to strangers.

You can ask any cold caller to put you on his firm's "do not call" list. You can also prevent some others from being conned by turning in any hypesters. Take names and notes during the call and report anything shady to the Securities and Exchange Commission (SEC) at www.sec.gov/complaint. shtml. The SEC offers some excellent guidance on cold-caller restrictions at www. sec.gov/investor/pubs/coldcall.htm. (Shady behavior would include rudeness, aggressive sales techniques and ultimatums.)

Anyone thinking of investing with a cold caller should check out the regulatory background of the salesperson and/or brokerage firm. To do that, visit the FINRA Broker Check area at www.finra.org or call 800-289-9999.

If this is too much to remember, you have one more option: Just hang up.