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Written by 10:01 am Blog, Securities Fraud

Is Cold calling permitted in the securities business?

Cold Calling

Cold Calling Investment Losses

Many securities firms telephone investors they do not know to sell stocks and other investments.  These “cold calls” can serve as a legitimate way of reaching new customers, but they can also lead to trouble.  Dishonest brokers may pressure you to buy a bad investment or a scam.  Whether the calls are annoying, abusive, or downright crooked, you can stop cold calling.

The law protects you by requiring cold callers to follow several rules:

  • Cold callers may only call you at home between 8:00 a.m. and 9:00 p.m.  These time restrictions do not apply if you are already a customer of the firm or you’ve given the firm permission to call you at other times.  Cold callers may call you at work at any time.
  • Cold callers must say who’s calling and why.  Cold callers must promptly tell you their name, their firm’s name, address or telephone number and that the purpose of the call is to sell you an investment.
  • Cold callers must 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, and your state’s securities regulator.
  • Cold Caller must avoid calls to you if you are on the National “Do Not Call” Registry managed by the Federal Trade Commission.  If you want to sign up, go to  Cold callers cannot call you if you are on this registry, unless you are already a customer, you previously gave written permission, or the caller is a family member, friend, or acquaintance.  However, even if any of those exceptions applies, you can still stop calls by asking the caller to put your name and telephone number on the firm’s “Do Not Call” list.  The FTC also accepts online complaints about unwanted calls from those on the National “Do Not Call” registry.
  • Cold callers must get your written approval before taking money directly from your bank accounts.  Before investing, you should always get answers to your questions and written information about the investment.  If you 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 take money from your checking or savings account.
  • Cold callers must tell you the truth.  People selling securities must tell you the truth.  Brokers who lie to you about any important aspect of an investment opportunity violate federal and state securities laws.

Violations of these Rules

If a cold caller violates any of these rules, you can complain to the firm’s compliance officer and/or FINRA (the self-regulatory body of the securities industry).

FINRA Notice to Member (NTM) 12-17 reminds broker-dealers of their obligations with respect to cold calling.  First it reminds them of NASD Rule 2212 (now FINRA Rule 3230)and NYSE Rule 440A.   NASD Rule 2212 and NYSE Rule 440A are similar rules that require member firms to maintain and consult do-not-call lists, limit the hours of telephone solicitations and prohibit members from using deceptive and abusive acts and practices in connection with telemarketing. The SEC directed FINRA and NYSE to adopt these telemarketing rules in accordance with the Telemarketing Consumer Fraud and Abuse Prevention Act of 1994 (Prevention Act).

The Prevention Act requires the SEC to promulgate, or direct any national securities exchange or registered securities association to promulgate, rules substantially similar to the FTC rules to prohibit deceptive and other abusive telemarketing acts or practices.

In 2011, SEC staff directed FINRA to conduct a review of its telemarketing rule and propose rule amendments that provide protections that are, in the SEC’s view, at least as strong as those provided by the FTC’s telemarketing rules.

If a broker solicits an investment by cold calling and you suffer losses as a result of that solicitation, you may also be able to recover your losses through a FINRA arbitration claim against the advisor or his/her brokerage firm.

Recovery of Investment Losses

If you have suffered losses in an investment as a result of being cold called by a broker, please call the securities attorneys of The White Law Group at 888-637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, visit

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