Oh the penny stock.
When compared to more traditional equities, penny stocks are less expensive dollar wise. But they’re also highly volatile and the companies behind them are often cloaked in obscurity.
“Penny stocks truly are the Wild West of the financial landscape,” says Robert Johnson, President and CEO of the American College of Financial Services.
Johnson is in good company with that assessment. “The fraudsters flock to the new and attractive space. I guess that shouldn’t surprise me, but it does. And the amount of fraud that exists and has existed in the penny stock space,” said Securities and Exchange Commission Chairman Jay Clayton at an event in Chicago this week on the topic of fraud in initial coin offerings and penny stocks. “Both of these issues trouble me.”
Nearly half of all ICOs failed last year, many of them at the hands of fraud. Sounds like the boiler-room days of the late 1990s, where pitching fraudulent penny stocks was the norm. It still looks like it’s the norm.