Penny stock fraud typically involves one or several kinds of investor fraud: Pump and dump schemes that use false or misleading statements to hype up stocks, which are then "dumped" on the public at inflated prices, usually through telemarketing or Internet fraud; chop stocks, or stocks bought for pennies but sold for dollars, affording both brokers and promoters massive profits "under the table" in undisclosed payoffs; and dump and dilute schemes, wherein fraudulent companies issue shares repeatedly, reverse-splitting the stocks or changing their names. Following are a few ways to protect yourself against such scams:
Beware of emails that promote any kind of stock aggressively. People who do this are often not operating under their real names. They can be anyone from a stockbroker or a company insider.
Secondly, ignore unsolicited telemarketing calls. These people usually work from temporary offices equipped with telephones being manned by aggressive salesperson's who promise things that are too good to be true. If you receive a call like this, don't give in to the pressure! Never invest in any stock that you don't even understand at all. The logical thing to do in this situation is to hang up.
Ask your broker for their CRD (Central Registration Depository) number. Call your state securities office to learn if your broker has a disciplinary record of some kind, and if the investment they are pushing is properly registered. Don't ever transact with brokers who can't provide you with written data about the investments they're hawking.
Fourth, if there are any unreliable press releases or data about a certain company, the SEC has the power to hold the trading transactions of that certain stock for ten days. So better think twice prior to investing in a certain stock, especially if that certain stock has undergone any SEC suspension in the past. You can verify the information through the SEC internet site.
Fifth, there is an SEC regulation known as the "Regulation S" which does not require certain companies to register the stocks that they are selling to foreign investors. Therefore, suspicious penny stock companies can sell their Reg-S shares at very low prices to fraudsters who act as foreign investors. These fraudsters eventually sell it back to American investors at radically high rates, getting large amounts of profits, which they basically share with the company insiders.
If you think you've been the victim of penny stock fraud, remember that according to the law, you only have a limited time period to take legal action. Talk to your broker right away, and find out exactly what happened who said what, when? Did you take notes on what you were told at the time? If you think your broker engaged in fraudulent transactions, put your complaint in writing immediately and send it to their firm. This could be the only way to prove that you complained to them.
If you're still not satisfied, send a letter to your state securities regulator, attaching copies of all the communications you've sent to the brokerage. Or else, send your complaint to the SEC directly using their online complaint form.
Beware of emails that promote any kind of stock aggressively. People who do this are often not operating under their real names. They can be anyone from a stockbroker or a company insider.
Secondly, ignore unsolicited telemarketing calls. These people usually work from temporary offices equipped with telephones being manned by aggressive salesperson's who promise things that are too good to be true. If you receive a call like this, don't give in to the pressure! Never invest in any stock that you don't even understand at all. The logical thing to do in this situation is to hang up.
Ask your broker for their CRD (Central Registration Depository) number. Call your state securities office to learn if your broker has a disciplinary record of some kind, and if the investment they are pushing is properly registered. Don't ever transact with brokers who can't provide you with written data about the investments they're hawking.
Fourth, if there are any unreliable press releases or data about a certain company, the SEC has the power to hold the trading transactions of that certain stock for ten days. So better think twice prior to investing in a certain stock, especially if that certain stock has undergone any SEC suspension in the past. You can verify the information through the SEC internet site.
Fifth, there is an SEC regulation known as the "Regulation S" which does not require certain companies to register the stocks that they are selling to foreign investors. Therefore, suspicious penny stock companies can sell their Reg-S shares at very low prices to fraudsters who act as foreign investors. These fraudsters eventually sell it back to American investors at radically high rates, getting large amounts of profits, which they basically share with the company insiders.
If you think you've been the victim of penny stock fraud, remember that according to the law, you only have a limited time period to take legal action. Talk to your broker right away, and find out exactly what happened who said what, when? Did you take notes on what you were told at the time? If you think your broker engaged in fraudulent transactions, put your complaint in writing immediately and send it to their firm. This could be the only way to prove that you complained to them.
If you're still not satisfied, send a letter to your state securities regulator, attaching copies of all the communications you've sent to the brokerage. Or else, send your complaint to the SEC directly using their online complaint form.
About the Author:
The author of this piece has uncovered an investment guru named Josh Yudell. I believe Josh Yudell is a Wall Street veteran, having spent his entire career in the fields of investor relations and investment banking.
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