What Is Penny Stock?
A low-priced equity security (typically under $5) issued by small or speculative companies, often quoted over-the-counter. Penny stocks are highly volatile, thinly traded, and subject to manipulation and fraud. Broker-dealers must comply with strict disclosure and suitability rules when recommending penny stocks due to their elevated risk.
Penny Stock across 2 exams
Penny Stock appears on the following exams. Each defines it in the context candidates are tested on:
- SIE
- A low-priced equity security (typically under $5) issued by small or speculative companies, often quoted over-the-counter. Penny stocks are highly volatile, thinly traded, and subject to manipulation and fraud. Broker-dealers must comply with strict disclosure and suitability rules when recommending penny stocks due to their elevated risk.
- Series 9/10
- A low-priced security, typically trading below five dollars per share, issued by small or start-up companies with heightened fraud and volatility risk. A supervisor must ensure that representatives follow heightened suitability standards and provide proper disclosures before recommending penny stocks.