Film Analysis commission on penny stocks, he
Brokers seemed to focus
The Wolf of Wall Street
Foreward/Agreement/Contract
A pervasive moral stigma follows
the financial sector, which has a
dogged reputation for unethical
and illegal behaviour. However,
the ethical lapses often associated
with finance are not always
intentional. Instead, a contributing
factor is that the teaching of
finance and other business
disciplines presents the challenge
of linking theories and conceptual
models to the “real world”.
Entertainment media – such as
films or books – are useful in this
aspect as case studies; they
provide students with an
organisational frame of reference
to better understand both
situational contexts, and
importantly, the human dimension
behind financial numbers.
This article written by Marie
POFF (ESSEC Business School,
Global Bachelor of Business
Administration, 2020) analyzes
the The Wolf of Wall Street film.
The movie The Wolf of Wall
Street is the true story of how
rags-to-riches trader Jordan
Belfort started with an OTC
brokerage firm using pump and
dump schemes, but eventually
became a main player on Wall
Street, where he launched the
IPOs of several large companies.
This black comedy shows
Belfort’s rise to the high-life and
excess of Wall Street, followed by
a sharp fall involving crime and
corruption – all while being
seriously entertaining.
Film Summary
The movie The Wolf of Wall
Street follows one of Wall
Street’s most infamous brokers,
Jordan Belfort, who makes a
fortune by defrauding investors
out of millions. Directed by
Martin Scorsese, the film starts
with Belfort as an entry-level
stockbroker at a Wall Street
brokerage firm, where he is
schooled on their cut-throat
selling techniques. After a major
market decline, he loses his job
and goes to work for a small
business selling penny stocks.
After discovering the higher
himself.
establishes his own firm, Stratton
Oakmont, where he sells penny
and IPO stocks with speculative
returns. Jordan builds a business
empire by presenting himself as a
polished entrepreneur and training
his employees on effective selling
techniques. He is soon living the
high life and becoming one of the
major players on Wall Street, but
soon discovers the dark side of
success when he blurs ethical
boundaries, quickly falling into a
world of crime and corruption.
Financial Concepts from The
Wolf of Wall Street film
Penny Stocks
Penny stocks are low-priced
stocks that do not trade on major
stock exchanges and are issued by
companies that typically do not
publish financial statements.
These trade anywhere from a
fraction of a cent to a few dollars,
and because the market
capitalization, stock price, and the
daily volume of these stocks are
quite low, they are highly
vulnerable to manipulation. For
example, a sudden large volume
of purchase or sale could cause
the price to drop by triple-digits in
a single day.
“Pump and Dump” schemes”
‘Pump and Dump’ penny stock
schemes are explained as the
manipulation of the market
through the accumulation of
shares from penny stock or other
companies, which are then stored
in secret accounts. Investors are
then ‘cold called’ to convince
them that these companies are
potential stocks for investments.
The influx of purchasing orders
would rapidly inflate the price,
assuring investors that the shares
are showing bullish behaviour.
Belfort’s firm was a type of boiler
room, with a team that pressured
investors to place their money
into highly speculative securities.
At its peak, the firm is said to
have employed about 1,000
stockbrokers overseeing more
than $1 billion worth of
investments.
Sales vs. Financial advisors
While working at L.F. Rothschild
in the 1980s, Belfort is quickly
taught that a stockbroker’s only
goal is to make money for
on selling stocks and generating
sales commissions, instead of
advising clients on the financial
risk of an investment or suitability
for their portfolio. Belfort and his
team are depicted as sales
professionals, not financial ones,
who are trained to sell
investments at the expense of the
client. Today, it’s still debatable
whether financial professionals
should be held to a fiduciary
standard, requiring them to act in
the best interest of a client, rather
than simply providing a product.
Key insights for investors
Too good to be true: be your own
investmentexpert
As the saying goes; if it sounds
too good to be true, it probably is.
Especially for beginners to the
stock market, it’s important to
remain clear-headed about your
investment decisions and do your
own research. Many of Belfort’s
victims trusted him and invested
all their life savings in
‘guaranteed’ stocks. Even with an
advisor, it’s useful to understand
financial markets and strategies,
perhaps by at first investing small
and diversifying your portfolio.
Legal vs. Ethical Behaviour
Legal standards are the rules
which govern the financial sector;
but while something can be legal,
it may not always be ethical.
Belfort’s company was within the
law when selling penny stocks,
but not fully disclosing the
speculative nature of the stocks
was completely unethical. While
he started by simply blurring this
line, Belfort soon crossed the line
and was convicted for not
following securities regulations.
Ethical business practices are the
foundation of trust and goodwill;
it’s important to take
responsibility for your actions.
The Road to Success
While perhaps not the best role
model, Belfort shows that long-
term success is not a straight road.
He experienced both failures and
successes before reaching the
height of his career on Wall
Street. Losing his job lead to him
starting as a stockbroker, and
even after going bankrupt and
serving time in prison, Belfort
finished his sentence and turned
 his strength in sales and
communications into a career as a
motivational speaker. Financial
mistakes can be rectified and
instead become lessons for
success. The most important step
a person can take, is the next one.
Relevance to the SimTrade
Certificate
SimTrade allows you to make
mistakes in a simulated
setting, without suffering the
financial consequences of
trading with your personal
funds. This course teaches you
how to analyse the impact of
events on stock prices and
understand important concepts
like market efficiency. As well
as theory, you practice
building a position, liquidating
a position, and how to make
the market. SimTrade is the
best way for you to take risks,
make mistakes, and learn how
to make the best decisions for
your portfolio.
Famous Quote
“Sell me this Pen” - Jordan
Belfort
This article written by Akshit
Gupta (ESSEC Business School,
Master in Management, 2022)
analyzes The Wolf of Wall
Street movie.
The Wolf of the Wall Street
(2013) is an American drama
movie based on true events
showcasing the life of an
infamous stockbroker and trader,
Jordan Belfort. The movie shows
how Stratton Oakmont, the firm
founded by Jordan and his
friends, was involved in a series
of large scale corruption and
scams that managed to dupe
people into investing their hard-
earned money in penny stocks.
On the marketing side, the use of
high-pressure telephonic tactics
and scripted talks has been shown
as an effective measure to lure
people into these scams.
Key characteristics in the movie
 Jordan Belfort: Founder of
Stratton Oakmont
 Donnie Azoff: Co-founder of
Stratton Oakmont
 Naomi Lapaglia: Wife of
Jordan Belfort
 Aunt Emma: Aunt of Naomi
residing in England
 Patrick Denham: FBI agent
 Jean-Jacques Saurel: Swiss
Banker
Summary of the movie
The movie starts by introducing
Jordan Belfort, a 22-year-old
stockbroker, who has joined an
investment bank named L.F.
Rothschild, based out in Wall
Street. He learns the art of
generating high commissions,
through his aggressive stock
pitching, very quickly while
working under Mark Hanna, a
senior stockbroker at the firm.
The unfortunate Black Monday of
October 19, 1987 occurs,
resulting in termination of
Jordan’s job at the bank.
To move forward with his career,
Jordan joins a Boiler Room stock
brokerage firm in the Long Island,
named Investors Center. The firm
deals in unlisted penny stocks and
pink sheets while engaging in
illicit businesses with high
commissions up to 50% of the
traded value. In his initial task,
Jordan is made to pitch the stock
of a company named Aerotyne, a
pink sheet stock of a company
based out in a small garage.
Jordan is lured by the amount of
potential this business carries.
Using his impressive sale tactics,
he makes a good fortune while
working at the firm.
While eating at a restaurant,
Jordan meets Donnie Azoff, his
neighbor, and both of them
become friends instantly. They
decide to open up a brokerage
firm, named Stratton Oakmont,
and recruit Jordan’s friends as the
senior brokers at the company.
Their business model relies on
luring the top 1% population of
America and gaining their
confidence by pitching blue-chip
stocks initially. As the investors
becomes loyal to the firm, Jordan
and his friends would sell them
unlisted penny stocks, on which
the company would earn high
commissions. The simple pump
and dump deal made Jordan a
millionaire within a short span of
time. As the company grew, the
founders started living a lavish
life spending on drugs and other
illegal needs and also recruited
more employees to expand their
operations. The company became
a big name on the Wall Street
with the Forbes magazine
publishing an article about them.
The excessive limelight brought
the firm under the radar of the
FBI and SEC starting to
investigate the operations of the
firm. Jordan brings in his father to
oversee the bank accounts for his
firm. To remain safe from any
issues, Jordan also hires a legal
advisor to keep a check on the
legal formalities.
After finding out about his
extramarital affair with Naomi
Lapaglia, Jordan’s wife divorces
him and soon he marries Naomi
in a fancy wedding. To gain more
popularity, the company decides
to launch the IPO of then-famous
brand Steve Madden. Jordan and
Donnie together hold around 50%
of the listed stocks of Steve
Maddens and when the stock
becomes a success they make
profits of more than $20 million
within a day. The IPO makes the
FBI more suspicious about the
firm and they start their
investigation on the same.
To keep his illicit money safe
from all the authorities, Jordan
decides to store it in offshore
accounts in Switzerland and takes
a trip for the same. Together with
his friends, Jordan meets a group
of bankers led by Jean-Jacques
Saurel and decides to open up an
account in the name of Naomi’s
aunt, Emma, who is a European
passport holder. The smuggling of
cash takes place over the next few
weeks and is deposited in the
offshore accounts.
Jordan’s private investigator
informs him about his phone
being tapped by FBI agents to
gather proof against him.
Cautious about his moves, Jordan
initially decides to step down
from his company but later
changes his mind, when requested
by his colleagues.
Jordan takes a trip to Italy with
his wife and Donnie’s family and
operates his business from there.
But soon, the news of Aunt
Emma’s demise arrives and otherwise worthless, and
Jordan decides to go to hampering the free and fair
Switzerland via Monaco, on a operations of the market, thereby
yacht to safeguard his money. The manipulating it. The alertness and
yacht is knocked over by a sea effectiveness of market regulators
storm and the group barely and agencies are what helped stop
escapes the incident. such schemes to operate openly in
the markets and safeguard
investor’s interest. Instead of
Taking it as a signal of God, working towards generating high
Jordan decides to sober up his life commissions and fulfilling their
and changes his lifestyle. Two ambitions, stockbrokers should
years after the incident, Jean engage themselves in building
Jacques Saurel is arrested in trust with their clients by keeping
Switzerland in some cases their interests in mind.
unrelated to Jordan but he
confesses about Jordan’s illicit
business and accounts. As fate
Most famous quotes from the
had its own plans, Jordan is
arrested with overwhelming movie
proofs. Jordan’s lawyer tries to
cut a deal with the FBI and in
Please find below some quotes
return, Jordan is asked to turn
from the movie that may help you
upon his other friends involved in
to progress in your professional
the scam. He agrees and his
career:
prison sentence is reduced to 36
months, completing which he
turns into a public speaker and “The only thing standing between
talks about his effective sales you and your goal is the bullshit
tactics. story you keep telling yourself as
to why you can’t achieve it.” –
Jordan Belfort
Relevance to the SimTrade course
“97% of the people who quit too
The lessons taught in the movie soon are employed by the 3%
perfectly blends with the concepts who didn’t.” – Jordan Belfort
that are taught on the SimTrade
course. The movie depicts the
effective use of concepts such as
“Demand & Supply” and ‘Market
Manipulation’ to generate high
profits. The technique used by
Jordan involves creating a need
for a product in the market and
building trust with his clients to
sell that product. The high-
pressure sale tactics were at the
core of this fraud which involved
duping thousands of investors and
creating an urgent demand for
products that had the so-called
potential to earn fortunes.

The financial frauds shown in the

movie include “pump and dump”
schemes which were very
prevalent in the financial markets
until a few years back. The
scheme involves inflating the
prices of penny stocks or pink
sheet stocks to high levels and
then selling them at those prices
to crash the market and make
huge profits. The brokers were
involved in creating artificial
demand for the stocks, that were