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Penny Stock Investment Fraud

22 Sep 17 - 00:06

You could have invested in the so called penny stocks in the past. It's important for you to be conscious of the drawbacks of these investments, so you can protect yourself as an investor. Many new stock market investors make the error of making an investment in thinking that they'll be ready to make a quick return. However, in truth, you may finish up losing giant amounts of money, as these kinds of securities are simply manipulated and likewise all sorts of frauds can happen. Though, not each penny stock can be thought as fraudulent, the possibilities of you having a difficulty due to a misconception are terribly high with small caps.

The most important technique of crime is by disinformation. It is very tough to get info about these stocks, as these securities are no longer bound by the data laws and rules that apply to standard growth stocks that are found in the New York Stock Exchange. Hence, you haven't any method of knowing if these investments will be able to earn income, since you will not have any trustworthy history to research on.

Additionally, you will not be informed about any top management changes or any top level calls as these firms don't have to tell the general public. So , you will not have the essential info that will help you to make the correct call about these securities. You cannot find info about their total fiscal assets, and their money return proportions and quotients.

They are subject to manipulation and in several cases; the middle management of these firms will use fake and manipulative media coverage from local Television stations, radios and other media outlets. You will watch these interviews and you may think that these small caps will be in a position to show great performance. Therefore, you may finish up purchasing numerous penny stocks only to see that you have lost a large amount of money.

E-mail spamming is the most typical crime methodology that these firms use. Millions of spam e-mail messages are sent to a lot of investors in the hope that many of them will fraudulently believe that these stocks will gain in price. In plenty of cases, these kinds of spam e-mail methods are employed, so the price control of these micro caps happens. When a lot of stock holders inquire about a certain small cap, then coincidentally the costs will go up because of the illusion of demand.

In several cases, the costs of these investments are manipulated and when you're making an attempt to sell your shares, you can quickly see the volume of trade is awfully thin.

This could make you have frozen assets, since you may not be in a position to sell your shares due to low demand. Therefore, you'll be compelled to sell your penny stocks with a low price and the manipulators will buy your shares at even a lower price from you. Often these sorts of activities are employed by black market dealers to wash filthy and illegal cash.

Paradigm Capital Management provides you with the best stock picks and stock analysis. Paradigm Capital Management is a trusted leader in small cap investing. With a long history of small-cap investing, Paradigm Capital employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact.
Also read: Investing in Micro Cap Companies

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