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Penny stocksalso known as cent stocks in some countries, are common shares of small public companies that trade at low prices per share. In the United States, the U. Prosecutors and the Federal Bureau of Investigation say that fraud is widespread in the penny stock market. In the case of many penny stocks, low market price inevitably leads to low market capitalization. Such stocks can be highly volatile and subject to manipulation by stock promoters and pump and dump schemes.
Such stocks present a high risk for investors, who are often lured by the hope of large and quick profits. Another problem penny stock trading account uk the penny stock market is that it has little liquidityso holders of shares in penny stock companies often find it difficult for them to cash out of positions. Many penny stocks, particularly those that trade for fractions of a cent, are thinly traded.
They can become the target of stock promoters and manipulators. This is referred to as a " pump and dump "  scheme. The pump and dump is a form of penny stock trading account uk stock fraud. In more sophisticated versions of the fraud, individuals or organizations buy millions of shares, then use newsletter websites, chat roomsstock message boardsfake press releases, or e-mail blasts to drive up interest in the stock.
When buying pressure pushes the share price up, the rise in price entices more people to believe the hype and to buy shares as well. Eventually the manipulators doing the "pumping" end up "dumping," when they sell their holdings. The expanding use penny stock trading account uk the Internet and personal communication devices has made penny stock scams easier to perpetrate. The Mafia had infiltrated Wall Street by the s.
Mob activity on Wall Street reportedly increased in the s. On February 10,The New York Times reported that "Mafia crime families are switching increasingly to white collar crimes " with a focus on "small Wall Street brokerage houses.
All three defendants pled guilty. Another example of an activity that skirts the borderline between legitimate promotion and hype is the case of LEXG. The promotion drew upon the legitimate growth in production and use of lithiumwhile touting Lithium Exploration Group's position within that sector.
According to the penny stock trading account uk December 31, form Q filed within months of the direct mail promotionLEXG was a lithium company without assets. Its revenues and assets at that time were zero. The "pump and dump" tactic is also known as a supernova and, unlike regular stocks, penny stocks usually move on momentum of the price action. Goldmen, and Hanover Sterling. In the United States, regulators have defined a penny stock as a security that meets a number of specific standards.
The criteria include price, market capitalizationand minimum shareholder equity. Securities traded on a national stock exchangeregardless of price, are exempt from regulatory designation as a penny stock,  since it is thought that exchange-traded securities are less vulnerable to manipulation. The State of Georgia was the first state to codify a comprehensive penny stock securities law.
Mortonthe only stockbroker in the Georgia General Assembly at the time, was principal sponsor of the bill in the House of Representatives.
Georgia's penny stock law was subsequently penny stock trading account uk in court. However, the law was eventually upheld in U. District Court and best stock broker india 2014 statute became the template for laws enacted in other states. Meyer Blinder was jailed for securities fraud inafter the collapse of his firm. From Wikipedia, the free encyclopedia.
United States Securities and Exchange Commission. Retrieved October penny stock trading account uk, Retrieved 30 March Securities and Exchange Commission. Penny stock trading account uk 4 January Financial Industry Regulatory Authority. Organized Crime on Wall Street R. Beware of Mailmen Bearing Gifts".