|
The U.S. Securities and Exchange Commission (SEC) requires stockbrokers to provide penny stock investors with certain information prior to the purchase of penny stocks. Once the stockbroker gives you the statement and your signature is obtained that you understand it, you and the stockbroker can then move on with the process used to purchase penny stocks. You will, however, have to wait two business days for your broker to contact you and make that first trade. That gives two days to go over the statement that was given to you before the purchase of penny stocks.
Penny stocks are the shares of small companies that tend to be low-priced and they usually trade over-the-counter but may also trade on the U.S. securities exchanges foreign exchanges, and facilities of U.S. exchanges. Federal law requires that the stockbroker give you the amount of the offer and the bid when looking to sell or purchase penny stocks. They are also required to tell you of the compensation that the stockbroker or the firm facilitating the trade gets when they take care of the selling of your penny stocks. The stockbroker must also provide confirmation to you of the prices after the trade has occurred. This is how you decide your profit and loss you will have when selling your stock.
Also, when you purchase penny stocks, your stockbroker must provide you with a monthly statement that estimates exactly how much your penny stocks are worth. If the firm has not sold or embarked on the purchase of penny stocks for around six months, statements can be provided every three months rather than monthly.
The stockbroker makes their money when you sell your stocks and they make nothing hen you purchase penny stocks. The only way they will make more money is if you sell sometime after you purchase penny stocks, so they will help you in the acquisition of new penny stocks in order to add it to your portfolio. However, many penny stock investors request advice outside of their stockbrokers to ensure they are making the right decisions regarding the trade of their penny stocks. This advice can include whether to purchase penny stocks or to sell penny stocks based upon the trends in the market.
The stockbroker gets the penny stocks purchase going as well as many purchases after that in order to build the portfolio. Once the portfolio is strong, the stockbroker may advise a sale of the stocks, but that is entirely up to the investor whether or not to make the sale. Stockbrokers, however, have an obligation to provide you with all the necessary pieces of data because if they deceive you, the SEC will take care of it.
We strongly recommend that you consult with a registered investment adviser before investing in any stocks. |
