We Unite! We Share!
Guidelines of Securities and Exchange Commission (SEC) on Penny Stocks
Generally penny stocks are traded over OTC bulletin board and pink sheets. Stocks that are traded on these exchanges are not required to give their accurate financial details. As a result it becomes difficult to get the exact information about a company. As a result many frauds and scammers enter this business and take advantage of this for which the investors suffer a lot.
To prevent these illegal actions of fraudsters, the Securities and Exchange Commission (SEC) has devised certain rules and regulations for penny stocks business. It can help investors to protect their investment from potential frauds and scams.
Some rules about penny stocks have been incorporated in The Securities Exchange Act of 1934 under Section 3(a) (51). The following rules suggest stocks that are not penny stocks. They are other stocks or fraud stocks.
The market value must be at least of $50 million. It is calculated by multiplying the number of listed shares with last bid price.
Stocks companies should comprise a net income of $750,000 (apart from extraordinary or non-recurring income) for the period of the last year or two years.
The company must be in the industry for at least one year and the average income must meet at least 6,000,000 during the last three years.
The smallest amount of shareholders' equity should not be less than $5,000,000.
The common stock of the company is required to have a minimum bid price of $4.
In convertible debt security, the minimum amount is required to be of $10 million. Convertible debt security refers a security that can be converted to other securities issued by the same company.
The company's common stock is required to be held by at least 300 different holders.
The stocks must have been warranted by an investment company under the Investment Company Act of 1940. Options Clearing Corporation is required to issue call or put options for these companies.
There should be a minimum 100,000 rights and warrants issued and these securities need to be indexed with the stock exchanges or an automated electronic system supported by a registered national securities association.
The above mentioned group refers to those that are not penny stocks. Investors must who will sell the stocks falling in any of the above mentioned category as a penny stock can be subject to scam or cheat.
It is essential that every broker-dealer organization engaged in penny stocks trading must acquire a written agreement from the customer before making any deal. This written agreement should explain the risks related to penny stocks investing. Besides, the current price and the broker's commission should be made clear.
The organization must also offer monthly statements to the customer presenting the current value of the invested penny stocks. Every investor must know the rules and regulations concerning these stocks.
This will help the investors a lot to earn and to safeguard from frauds and scams involved in penny stocks trading.
To prevent these illegal actions of fraudsters, the Securities and Exchange Commission (SEC) has devised certain rules and regulations for penny stocks business. It can help investors to protect their investment from potential frauds and scams.
Some rules about penny stocks have been incorporated in The Securities Exchange Act of 1934 under Section 3(a) (51). The following rules suggest stocks that are not penny stocks. They are other stocks or fraud stocks.
The market value must be at least of $50 million. It is calculated by multiplying the number of listed shares with last bid price.
Stocks companies should comprise a net income of $750,000 (apart from extraordinary or non-recurring income) for the period of the last year or two years.
The company must be in the industry for at least one year and the average income must meet at least 6,000,000 during the last three years.
The smallest amount of shareholders' equity should not be less than $5,000,000.
The common stock of the company is required to have a minimum bid price of $4.
In convertible debt security, the minimum amount is required to be of $10 million. Convertible debt security refers a security that can be converted to other securities issued by the same company.
The company's common stock is required to be held by at least 300 different holders.
The stocks must have been warranted by an investment company under the Investment Company Act of 1940. Options Clearing Corporation is required to issue call or put options for these companies.
There should be a minimum 100,000 rights and warrants issued and these securities need to be indexed with the stock exchanges or an automated electronic system supported by a registered national securities association.
The above mentioned group refers to those that are not penny stocks. Investors must who will sell the stocks falling in any of the above mentioned category as a penny stock can be subject to scam or cheat.
It is essential that every broker-dealer organization engaged in penny stocks trading must acquire a written agreement from the customer before making any deal. This written agreement should explain the risks related to penny stocks investing. Besides, the current price and the broker's commission should be made clear.
The organization must also offer monthly statements to the customer presenting the current value of the invested penny stocks. Every investor must know the rules and regulations concerning these stocks.
This will help the investors a lot to earn and to safeguard from frauds and scams involved in penny stocks trading.
Comment
About
© 2010 Created by Khmer Scholars on Ning. Create a Ning Network!
You need to be a member of Khmer Scholars Network to add comments!
Join this Ning Network