Penny Stock Regulation
The regulation and prosecution of securities fraud violations is undertaken on a broad front, involving numerous government agencies and self-regulatory organizations. One method of regulating and restricting a specific type of fraud perpetrated by pump and dump manipulators, is to target the category of stocks most often associated with this scheme. To that end, penny stocks have been the target of heightened enforcement efforts. In the United States, regulators have defined a penny stock as a security that must meet a number of specific standards. The criteria include price, market capitalization, and minimum shareholder equity. Securities traded on a national stock exchange, regardless of price, are exempt from regulatory designation as a penny stock, since it is thought that exchange traded securities are less vulnerable to manipulation. Therefore, CitiGroup (NYSE:C) and other NYSE listed securities which traded below $1.00 during the market downturn of 2008–2009, while properly regarded as "low priced" securities, were not technically "penny stocks". Although penny stock trading in the United States is now primarily controlled through rules and regulations enforced by the United States Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), the genesis of this control is found in State securities law. The State of Georgia was the first state to codify a comprehensive penny stock securities law. Secretary of State Max Cleland, whose office enforced State securities laws was a principal proponent of the legislation. Representative Chesley V. Morton, the only stockbroker in the Georgia General Assembly at the time, was principal sponsor of the bill in the House of Representatives. Georgia's penny stock law was subsequently challenged in court. However, the law was eventually upheld in U.S. District Court, and the statute became the template for laws enacted in other states. Shortly thereafter, both FINRA and the SEC enacted comprehensive revisions of their penny stock regulations. These regulations proved effective in either closing or greatly restricting broker/dealers, such as Blinder, Robinson & Company, which specialized in the penny stocks sector. Meyer Blinder was jailed for securities fraud in 1992, after the collapse of his firm. However, sanctions under these specific regulations lack an effective means to address pump and dump schemes perpetrated by unregistered groups and individuals.
Read more about this topic: Securities Fraud
Famous quotes containing the words penny, stock and/or regulation:
“Listen world,
if you’d just take the time to pick
the white fingers, the penny heart,
all would be well.
They are so unexpected.
They are as good as salt.”
—Anne Sexton (1928–1974)
“However low and poor the taking Snuff argues a Man to be in his own Stock of Thought, or Means to employ his Brains and his Fingers, yet there is a poorer Creature in the World than He, and this is a Borrower of Snuff; a Fellow that keeps no Box of his own, but is always asking others for a Pinch.”
—Richard Steele (1672–1729)
“Nothing changes my twenty-six years in the military. I continue to love it and everything it stands for and everything I was able to accomplish in it. To put up a wall against the military because of one regulation would be doing the same thing that the regulation does in terms of negating people.”
—Margarethe Cammermeyer (b. 1942)