What is penny stock rule?

The term penny stock refers to securities that usually trade at over the counter market at less than $5 per share. Such stocks are mostly issued by smaller companies whose shares trade on OTC Markets or less frequently on OTC Bulletin Boar. Penny stock are also considered highly speculative, with small market capitalization, lacking liquidity and disclosures urging Congress to prohibit broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934 also known as Penny Stock Rule.

To comply with the requirements of Section 15(h) of Securities and Exchange Act broker-dealer must:

approve the customer for the specific penny stock transaction and receive a written agreement to the transaction
furnish the customer a disclosure document describing the risks of investing in penny stocks
disclose to the customer the current market quotation, if any, for the penny stock
disclose to the customer the customer the amount of compensation the firm and its broker will receive for the trade
after executing the sale a broker-dealer must send to its customer monthly account statement showing the market value of each penny stock held in the customer's account.

This security is exempt from the definition of a Penny Stock under SEC under Rule 240.3a51-1 because it meets one of the following tests:

a price over $5 per share
the issuer has average revenue of at least $6 million for the last 3 years
the issuer has net tangible assets in excess of $2 million if the issuer has been in contentious operations for at least 3 years or $5 million if less than 3 years.

Comments

OTC stocks more difficult to trade and deposit

Mina Mar Group helps micro-cap companies structure their growth. Micro-capitalized companies are those with less than $50,000,000 in equity, sometimes under $1,000,000. Restructuring involves raising money (both debt and stock), and planning how they will eventually harvest that wealth. If you’re a founder or investor, the secret to harvesting your equity is to possess assets with a developed market for their sale; up until recently, that market was the public market. Now, Over-The-Counter Securities (“OTC Securities”) don’t serve that purpose since, unless you’re a tech unicorn doing an IPO, there are essentially no ways to sell the shares you’ve invested in. OTC securities – how they were deposited five years ago. Brokerages all around the country have tightened compliance over the past five years to the point where no one may deposit share certificates into their brokerage accounts, even if they can prove that they paid for them. Consider the following demand from a secondary brok

Foreign Companies

Lately, we are getting many inquiries about dual listing or to list foreign companies either through IPO or RTO on OTCmarket. What are the benefits for foreign companies to be listed on OTC markets and how they can do that? Is it an easy procedure, and what are the conditions? What is the main reason for companies that are listed on qualified foreign exchanges to trade on OTC markets? We are here to cater to your questions by providing you with the right answers. The first thing we need to start with is that this market is a global market. Only that fact gives you countless opportunities. To be listed on Wall Street which represents a vital center of global finance, for early-stage growth companies, and having access to US investors can bring a significant competitive advantage. It is appropriate for small businesses due to its regulatory structure, which gives better transparency and accessibility to a bigger pool of less risk-averse and more active investors. This is important for s

S1 Registration

A Form S1 represents the opening registration that a US firm must submit with the SEC prior to an Initial Public Offering. The Securities Act requires a registration statement, otherwise known as Securities and Exchange Commission Form S1, previous to security can be issued on a public exchange such as the NASDAQ, NYSE, or other exchanges. Foreign corporations can register with the SEC, but they must do so using the SEC Form F1. Corporations must fill out Form S1 to outline their intended use of capital proceeds, a description of their current business strategy and competition, and a brief prospectus for the new security, including offering pricing mechanism and any other dilution to other listed stocks. The SEC also mandates that any material business conducted between the corporations and its directors and external counsel be disclosed. Investors can access S1 filings online in order to do due diligence on new offers before they go public. As a result, businesses can use the SEC’s

Mina Mar Group

Search This Blog