Are Penny Stocks Registered With The Sec

Nosotros may receive compensation for products we feature on our website. As an Amazon Acquaintance we earn from qualifying purchases. Thanks for your support!

When new to investing and trading penny stocks, you will desire to ensure you know everything near the rules regarding Penny Stock trading. Penny stocks can exist extremely risky, and so equally a result there are many laws and rules in place to help protect you. While these regulations can limit you as a new beginner investor, in general they are useful. These rules are created and enforced through The Securities and Exchange Commission (SEC), and bear upon yous the trader as well equally the online broker you choose to use to make your trades. Today we will talk about these penny stock trading rules and regulations and how they touch on you.

Why the Rules?

Penny stocks are very high adventure and investors often brand decisions purely on their own speculation of how a stock may perform. You may detect some penny stocks practice non move at all, or the company could go completely bankrupt, especially when it is common for many new startups to neglect.

Penny stock laws, rules and regulations are created and designed to protect you (the customer), the stock marketplace exchanges, and the broker. If a banker breaks whatsoever of these rules prepare forth past the SEC, then the broker can be subject to SEC investigations that can event in serious trouble for the brokerage business firm. If the broker is in problem, this can cause you lot to lose your investments also.

This is why information technology is important for the beginning trader/investor to be aware of the penny stock rules. You need to make certain the broker you choose to apply is post-obit all rules accordingly so that your trades and investments are not compromised in whatsoever style. Information technology's also important you sympathize these rules so you do non go stuck as a new trader.

Understanding Which Penny Stocks Are Affected By These Rules

While I by and large allocate a penny stock every bit a stock that is trading between $1-$ten when looking for companies to add together to my stock lookout list, the SEC defines a penny stock equally whatever stock that is priced between 1 cent and $5. While these rules can utilize to many unlike exchanges, these rules are especially enforced when a penny stock is traded over over-the-counter {i.e.: The OTC Bulletin Board}.

Here is an Overview of the Penny Stock Trading Rules

Broker Requirements
All brokers must comply with Section 15(h) of the Securities Commutation Human activity of 1934 ("Exchange Act").

Every broker must do the following:

First approve the customer to be eligible for penny stock trading. This is often done through brokerages who set forth a minimum account amount or other process.
The brokerage house must obtain a written agreement from the customer regarding purchasing the penny stock and the transaction must exist canonical to complete the transaction.
Provide the customer with a disclosure document which clearly outlines all of the risks which are likely when trading penny stocks.
Disclose the electric current market quotation for the penny stock to the consumer.
The firm must too conspicuously disclose to the customer what their commission will be for the trade, as well as what costs the investor will incur and the amounts of bounty the brokerage firm will receive for the trade.
The brokerage must also report account statements each month to the customer which clearly represents the current marketplace value of each penny stock held in the customer's account. They must besides abide to The Customer Protection Dominion (Rule 15c3-3), which states the brokerage firm cannot utilise funds that belong to customers to fund their own business.

While these laws and regulations may seem to be a huge hassle, retrieve they are there to protect you. It is EXTREMELY risky to invest in Penny Stocks, especially when purchasing them through the OTC Bulletin or other over-the-counter substitution.

I hope this is helpful for those of you who may be considering investing in penny stocks. If you accept any penny stock trading questions, ask them in the comments below – or even better, join TheTradeLocker Free Stock Market place Community – nosotros'd beloved to have you lot join the discussion and to help you improve your trading strategies!