Stock swindlers fleece investors out of millions of dollars every year. Exactly how many millions is not known. The swindlers, operating illegally, or, at best, on the barest edge of legality, are not inclined to report their profits. The victims, beating their foreheads in humiliation, are hesitant to confess their stupidity. But one classic swindle alone, engineered in the past year or so, mulcted the suckers for $16 million, and its promoter was by no means the only operator in the field.

What usually happens is this. The victim—we might as well stop calling him an investor right now—receives a phone call from a brisk and authoritative gentleman who identifies himself as a broker representing the Gilt-Edge Investment Company. The victim has never heard of Gilt-Edge, but then there are many companies unfamiliar to him and, anyway, the caller is rushing on. Gilt-Edge is offering a select list of investors (their word) an opportunity to buy 1,000 shares of Acey-Deucy Consolidated Uranium at $.20 a share. This, of course, is not just another uranium stock. Acey-Deucy has stumbled onto a deposit that has assayed very high, and, when the news gets out in the next week, the price is sure to hit $1.

Well, the victim tells himself, it's a gamble. But $200 isn't too much to risk. He agrees. He sends off his check and lapses into a lovely reverie.

A few days later Gilt-Edge is back. Has the victim been watching? No, as a matter of fact, he hasn't. Well, Acey-Deucy has hit $.30, but so many people are getting aboard that Gilt-Edge has just about exhausted its supply of stock. Tell you what, though, Gilt-Edge is negotiating for a large block at $1 a share. If Mr. Victim will take another 1,000 at $.30, Gilt-Edge will give him an option, for free, on another 1,000 at $1. Then, when the stock hits $2, as Gilt-Edge is now confident it will, Victim can exercise his option at $1 and make an automatic $1,000 profit, not to mention the tremendous capital gains on his other 2,000 shares.

So, $300 follows the way of the first $200, and Victim is now a little feverish. He starts combing the lists of over-the-counter stocks to see what, in fact, Acey-Deucy is doing. Sometimes he finds it. Sometimes he doesn't, and must com­fort himself that no paper can print more than a few of the active over-the-counter issues, and that Acey-Deucy's absence is probably due to the semisecret inside action of which, fortunately, he is a part.

When Gilt-Edge calls again, hoarse with urgency, Victim isn't sure what to do. Gilt-Edge has another plausible, almost too-easy deal. An estate settlement has put another 100,000 shares of Acey-Deucy on the market at attractive terms. Or Acey-Deucy itself, now seeking development money, is issuing 200,000 shares. Or something.

Gee, says Victim. I'm at the end of my ready cash. Incredulous, or a little stern, Gilt-Edge implores Victim not to let this great opportunity slip by. Savings? Victim must have some savings. Or perhaps some less energetic stocks, like Standard Oil or General Mills, that aren't doing much right at this particular time.

Whatever the possibility, Victim, now being led by the nose, accedes. Off goes $500, or $1,000, or $2,500, or the works.

Now the end is in sight. Victim gets no more calls from Gilt-Edge. The next listing of Acey-Deucy, if he finds one at all, shows that the price has slid to three cents. He tries to call Gilt-Edge and finds the phone disconnected. He writes, but his letter is returned. He has been hooked by a "boiler shop," probably along with hundreds of others.

The pattern has variations. Sometimes Gilt-Edge has a gold mine, although in recent years uranium has been far more glamorous. Sometimes it is an oil well. Sometimes it is a Canadian venture, sometimes a bonanza right here in the little old U.S.A. As beryllium and other rare earths come into greater prominence as vital components of rocket-age alloys, there will probably be swindles centered around them. The amount of stock may vary, or its price, or the conditions under which it is offered. The only consistency is that the victim pays something for nothing.

Two minutes' worth of analysis of Victim's sad story, of course, will reveal a dozen instances of poor judgment. For one thing, the danger signal is up the moment you receive a telephone call from a stranger purporting to be a broker. Legitimate brokers just do not hustle business by phone. It is possible that your own broker may inform you of an estate settlement which has enlisted his firm in the disposal of a large block of stock, but you may be sure it will be American Can or National Steel, not Acey-Deucy. In any event, there will be no pressure, no speculation.

If you ever get such a call, just say, "No," and keep on saying it. It is no protection to insist on identification. Gilt-Edge will tell you anything you want to hear. An address in the Wall Street area means nothing. Anyone can hire a suite of offices—or, more likely, a loft with a battery of phones. Don't ask for literature. It's easy to print, and Gilt-Edge has tons of it to send you, if you haven't gotten it already to soften you up for the telephone call. Just say, "No."

And if you ever get such a call from your own broker, switch your account elsewhere. You're dealing with the wrong kind of firm.

If you have been unable to summon up a hard refusal, the least you can do is double-check the stock being offered, before you rush your money into the mail. Call your regular broker and ask his advice. That's what he's there for. He will get a report from his research department or from the Standard & Poor's manual, and let you know in plenty of time to accept Gilt-Edge's offer, if by any strange chance it should be bona fide. If his report is negative, or if none is available, you can be sure you're getting involved with a nothing stock.

Be realistic. Common logic should tell you that there is something strange about your being approached with such an advantageous deal, when there as so many investors so much smarter and more deserving. Are you famous, or some­thing? Do people ordinarily stop you in the street and press money into your hand? Ask yourself, why me?

Beyond this, of course, is the whole matter of speculation. You know better. If you take investment seriously at all, you must know that only the wildest sort of blue-sky specu­lation is going to go from $.20 to $2—a 1,000 per cent rise —in a few days or weeks, and that loose promises that it will do so are sheer folly.

And, finally, if in spite of everything you are tempted to speculate, be reasonable. Two hundred dollars you might be able to afford losing. But it's suicidal to shoot the wad.

If, however, you take any step beyond the first big "No," when the Gilt-Edges of this world call you, you have no claim to the honored title of investor. You are now a stock gambler and nothing more.

It is easy to say what a boob Victim was. You'd never catch me like that, you say. Yet crude as the approach may be, it appeals to the greedy streak in all of us and, properly handled, can seem terribly plausible and terribly appealing. The boiler-room operators are no dopes. Their psychological weapons are considerable. They practice one-upmanship of a very high order. They are fluent and friendly, a touch con­spiratorial, as they let you in on this marvelous discovery, just waiting to be picked up. They are casual and worldly. If you ask slow-witted questions, like who is calling, and what is Gilt-Edge, and what in the world is Acey-Deucy, the caller's voice takes on a tinge of disappointment or scorn. Surely, Mr. Victim, you aren't so cloistered and out of touch that you don't know the score? Surely, Mr. Victim, when someone is offering you a 1,000 per cent profit, you aren't going to quibble? Do you want us to stuff your profits into your wallet for you, or do you have zippers on your pockets?

Perhaps it will be a little less embarrassing if you will give your imagination a rest and consider just what a boiler room is like. Gilt-Edge is not sitting in a paneled office with a deep-pile carpet. He is a fly-by-night who will perch anywhere that has a table, a chair and a phone. He and his col­leagues—any number may play—spend their day calling names on a list, to see who will bite. The list may have been compiled from the phone book or a professional directory, or bought from a commercial list house. Very often, the person you speak to first is the "Opener." If you prove to be balky, or if you have responded to the initial appeal and are now set up for the big swindle, you may find yourself talking to the "Reloader," an expansive and even more subtle and irresistible con man.

The boiler-room operators work fast. They must make their killing and blow. For honest brokerage houses, the exchanges, and state attorney generals are waging unre­mitting war against them. The longer the swindlers stay in one place, the more likely they are to call someone who will blow the whistle and set the authorities  on their  trail.

Unfortunately, the victims themselves are often the swindlers' best protection. Greed silences them while the swindle is being set up. Shock and shame at having been trapped often strikes them dumb when the game is over. And even the occasional loser who squawks usually does so too late, after the boiler-room crew has banked its fires (and its profits) and stolen away.

The Securities and Exchange Act, too, is not infallible. It has several loopholes that enable swindlers to evade the law, and make them difficult to prosecute. For instance, any corporation issuing stock worth $300,000 or more is sup­posed to register with the Securities and Exchange Com­mission. Registration does not confer a stamp of approval on the stock, but it does require the disclosure of certain financial information about the issuing company that prospective buyers can study before committing themselves. Acey-Deucy, of course, could never stand the scrutiny of the SEC, or of a careful investor examining an SEC-approved prospectus. In some cases, Acey-Deucy and its ilk are dry oil wells or worn-out mines that haven't been worked in fifty years. Yet the swindlers try to avoid outright fraud.

For there are exceptions to the registration law which enable the stock to be issued legally. If all the stock issued is to be sold within the state where the company is located, registration is not necessary. Or if stock is exchanged in the course of a sale or merger approved by the stockholders, registration is unnecessary. Accordingly, if Acey-Deucy has sold out its initial offering, it might buy up a corporate shell—a dormant company consisting of a name, incorpo­ration papers, and a capital structure. As the controlling in­terest in the new acquisition, the Acey-Deucy people can float new stock without reference to the SEC.

These, however, are purely technicalities. It might be better if such loopholes could be plugged, but none of them will make any difference to the investor who is intent on remaining an investor, and who is sensible enough to ignore any stock he has not thoroughly acquainted himself with.

Perhaps even more beguiling than the "penny stocks" like Acey-Deucy are the cats and dogs that exist on even the most respectable exchanges. Many people think that once a stock has reached, say, the New York Stock Exchange it must automatically be among the elite. Not so. While there are certain minimum requirements for listing, and while the new-listing departments of the exchanges are quite scrupulous, there is no guarantee that a certain capital investment and a certain number of stockholders and a regular financial re­porting procedure make a stock a stable investment. Yet every so often, even the soberest of investors will get tips and hear rumors about bright prospects for an apparently undistinguished stock. Sometimes they are true. Small com­panies grow bigger. Companies earning little sometimes turn the corner and earn a lot.

But check your broker before plunging in. Many broker­age houses keep a kind of gray list of unsafe, chancy, specu­lative stocks that their customers are earnestly warned to-avoid. Whether yours does or not, you will certainly be able to get a professional assessment of the stock that's tempting you, to balance against the rumor you have heard.

In the spring of 1959, speculation on the American Stock Exchange caused grave concern among the brokerage firms and the financial publications. No Acey-Deucys were in­volved. But a number of companies working in the glamour field of electronics suddenly attracted attention, and some of them—with the help of persistent and widespread rumor— began to rocket skyward. It was a difficult situation to assess. Surprising spurts were being recorded even by such sober­sides as American Telephone & Telegraph. Yet, as has been emphasized time and again, stock represents earning power. And price jumps that exceed foreseeable earnings are tinged with danger.

Remember, there is always a company behind your stock. Know this company before you buy. Unless you are satisfied with its past record, its product, its management, and what you can learn of its prospects, stay away. If this is too much trouble, take up roulette or bet the horses. There, at least, you won't have to pay commissions or wait a couple of weeks before you discover you've lost your shirt.