93ºF

The truth about penny stocks

photo

Penny stocks; websites and emails claim you can get big returns with little investment. Postal Inspector, Virginia Columbo, said she knows the truth. "They are considered very risky stocks."

As the stock market rose to all-time highs, investors have been buying shares of these small companies at a record pace. Columbo said, "The risk with microcap stocks is they do not have to report to the SEC, which allows room for fraud and have people come in and pretend they are more than they are."
Regulators have been tracking this activity and have a warning for consumers, beware of many of the tactics being used to pump up penny stocks. "You have a promoter behind the scenes," according to Columbo. "Who probably stands to benefit from this or own share of this stock."

Those so-called promoters can blast spam out saying "this is the "deal of the century," or the company is about to make a "major announcement." They even say things like we recommend you "buy this as soon as possible". Columbo said don't fall for it. "The promoters and the scammers that have the financial benefits to sell it will dump it and the stock will drop. Then all of the new investors who bought all this stock will be out of the money they just invested and it's worth nothing essentially."

Postal inspectors say investors should be skeptical of email tips. Do your own homework before investing in a penny stock. Also, if a company is not registered with the SEC, postal inspectors recommend calling the office in your state that regulates financial investments to find out more about the company. If you still can't find information, proceed with great caution. To check if a company is registered with the SEC, click this link and follow the directions. If you've been scammed, you can file a complaint with the Florida Office of Financial Regulations.