Low Priced Stocks

The term “penny stock” generally refers to low-priced (below $5), speculative securities of very small companies. While penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board or in the Pink Sheets, they may also trade on securities exchanges, including foreign securities exchanges. In addition, penny stocks include the securities of certain private companies with no active trading market.

1. Investing in low-priced securities is speculative and involves considerable risk: Low-priced securities often exhibit high price volatility and erratic market movements. Often, when investors buy or sell these securities, they significantly affect the quoted price. In some cases, the liquidation of a position in a low- priced security may not be possible within a reasonable period of time and is subject to additional fees.

2. It may be difficult to properly value an investment in a low-priced security: Reliable information regarding issuers of low-priced securities, their prospects, or the risks associated with investing in such securities may not be available. Certain issuers of low-priced securities have no obligation to provide information to investors. Some issuers register securities with the Securities and Exchange Commission (SEC) and may provide regular reports to investors. Others, however, may not be required to maintain such registration or provide such reports. Securities may continue to be traded if issuers are delinquent in their reporting obligation to the SEC or other federal or state regulatory agencies.

3. Penny stocks have not been approved or disapproved by the Securities and Exchange Commission (SEC): The SEC has not passed upon the fairness, the merits, the accuracy or adequacy of the information contained in any prospectus or any other information provided by an issuer or a broker or a dealer of penny stocks.

4. Trading low-priced securities is subject to significant risks, increasing regulatory requirements and oversight, and additional fees:

Generally, a penny stock is a security that:
• Is priced under five dollars;
• Is not traded on a national stock exchange or on NASDAQ;
• May be listed in the “pink sheets” or on the Over The Counter (OTC) Bulletin Board;
• Is issued by a company that has less than $5 million in net tangible assets and has been in business less than three years, by a company that has under $2 million in net tangible assets and has been in business for at least three years, or by a company that has revenues of $6 million for 3 years.

5. It is your responsibility to investigate the eligibility status of a low- priced security before trading it: It is strongly recommended that you contact the specific company whose equity you intend to trade to confirm eligibility.

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