Penny Stock Disclosure Requirements

What this video covers

• Why the Securities and Exchange Commission (SEC) imposes extra rules on penny stocks: pump-and-dump risk, wide spreads, low liquidity, and limited public information
• The exact $5 price threshold and the requirement that the security be unlisted or over-the-counter (OTC) for penny stock rules to apply
• Inside bid and ask quotation disclosure: what must be disclosed (bid, ask, and number of shares) and the strict before-the-transaction timing
• Compensation disclosure: why both the broker-dealer firm's aggregate compensation and the associated person's compensation must be revealed before the trade
• The dual suitability trap: why a penny stock recommendation must satisfy both standard suitability and the additional OTC equity suitability obligations
• The exchange-listed exemption: why Nasdaq and national exchange securities are never subject to penny stock disclosure rules regardless of price
• The before-the-transaction timing pattern that applies to every penny stock trigger (disclosure, compensation, and suitability)