Penny stock scam

Many of the microcap companies don’t file reports with the SEC. This cause the lack of reliable, readily available information for them and can attract fraud. It’s easier for fraudsters to manipulate a stock when there’s little or no information available about the company.

Microcap fraud depends on spreading false information. Fraudsters will use email, and forums to spread false about cheaply microcap company. Some microcap companies pay stock promoters to recommend or “tout” the microcap stock in supposedly independent and unbiased investment newsletters, research reports, or radio and television shows.

Microcap fraud schemes can take a variety of forms. The most common schemes is The Classic “Pump and Dump” Scheme. It’s common to see messages posted on the Internet that urge readers to buy a stock quickly or to sell before the price goes down. Often the promoters will claim to have “inside” information about an impending development or to use an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by the buying frenzy they create. Once these fraudsters sell their shares and stop hyping the stock, the price typically falls, and investors lose their money.

So BE CAREFUL ON PENNY STOCK INVESTING.

Source: http://www.sec.gov/investor/pubs/microcapstock.htm

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