Dear U.S. Securities and Exchange Commission,
If penny stocks are so dangerous and susceptible to scams, why do they exist at all?
The SEC is losing the battle against penny stock scams.
In 2012, they launched a task force to combat penny stock fraud called Operation Shell-Expel. It resulted in trading suspensions of more than 800 microcap stocks, which comprises more than 8 percent of the OTC market.
Victory? Not quite.
Think of these shells as an empty warehouse where someone (oftentimes organized crime and previously accused and convicted scam artists) can sneak in unnoticed, put a sign outside, make it appear that honest business is happening inside and then claim they are producing and selling just about anything from Hollywood movies to magic marijuana.
It happens a lot and the SEC knows it. Chances are, you or a friend may have invested in the 2014 Pot Bubble and are currently holding worthless shares of a stock that was “going to da’ moon!”
While 8% of the OTC market might sound like a big dent, it’s not. In lieu of this perceived progress, we are apparently moving backwards.
On September 9, 2016 the House voted 236–178, largely along party lines, to approve legislation that would allow microcap companies, which include penny stocks, to tap a method of issuing shares that typically involves less oversight.
Even though regulators, like the SEC, warn that microcaps are more susceptible to manipulation by swindlers and company insiders, Republicans who supported the legislation said it would let smaller companies use a fundraising tool that has been restricted to bigger companies.
Less oversight? Penny stocks as fundraising tools? Really? In this age of crowdfunding and venture capitalism?
I say shut the whole fucking thing down and start over with new rules that don’t allow scam artists, like the age-old pump and dump schemes, to manipulate the system with the help of shady lawyers.
One final note: Isn’t it odd that most of the lawyers who help these penny stock scams operate in South Florida?
Enough already.
