Nov06
Share on facebook Share on twitter Share on email Share on linkedin More Sharing Services
Penny Stock Scams ~ Investor Alert
Last week, the SEC’s Office of Investor Education and Advocacy and FINRA issued an alert to investors regarding penny stock scams. Fraudsters are aggressively marketing the stocks of dormant shell companies with little to no business operations as great opportunities in the form of penny stocks.
The fraudsters engage in a pump-and-dump scheme where they acquire the shell company stocks at a very low value, spread misleading information to inflate or pump up the price, then sell their shares, leaving the investors with stocks of little to no value.
FINRA’s Senior Vice President for Investor Education, Gerri Walsh, said, “Investors should be on the lookout for press releases, tweets or posts aggressively promoting companies poised for explosive growth because of their ‘hot’ new product.”
The SEC and FINRA provide five tips to avoid penny stock scams:
Was a dormant company revived?
The SEC’s EDGAR database will show you when the company last filed periodic reports.
Where does the stock trade?
Most stock pump-and-dump schemes involve stocks that do not trade on The NASDAQ Stock Market, the New York Stock Exchange or other registered national securities exchanges.
Were there frequent name changes or shifts in focus?
A company changing names repeatedly should be a bright red flag.
Were there mammoth reverse splits?
A dormant shell company might carry out a 1-for-20,000 or 1-for-50,000 reverse split.
Is there a “Q” at the end of a stock symbol?
If the fifth letter of a company’s stock symbol is “Q” the company has filed for bankruptcy.
AI
