Penny Stocks and Associated Rules

What this video covers

• The penny stock definition: why BOTH unlisted and under $5 must apply, and why a $2 NYSE stock is never a penny stock
• The three definitional exemptions based on net tangible assets ($2 million or $5 million thresholds) and average revenue ($6 million threshold)
• The four pre-trade disclosures (risk disclosure document, quotation disclosure, compensation disclosure, and suitability statement) and which two require customer signatures
• The mandatory two-business-day waiting period that applies after the risk disclosure document and suitability statement are sent
• Why the suitability-only exemptions (established account over one year, or three prior penny stock purchases on separate days with different issuers) do not waive the other disclosures
• The total exemptions (unsolicited orders, institutional accredited investors, and issuer insiders) that remove every penny stock rule
• The two-part compensation disclosure: separate figures for the associated person and the broker-dealer firm's aggregate compensation
• The supervisor's financial-statement review requirements for OTC equity recommendations, including the aging rules for domestic (15 months max, P/L needed after 6 months) and foreign (18 months max, P/L needed after 9 months) issuers