Private investments can still lead to viable securities claims

Penny stocks are stocks that are not listed on a national exchange such as NYSE or NASDAQ, that trade below $5 a share, and that meet other defined SEC criteria. Usually, investors do not use a broker to make penny stock investments. Still, there are times when brokers do intervene and recommend these types of stocks. When brokers do take an active role and recommend penny stocks, the broker and the broker’s firm must meet specific requirements established by the SEC

If you have been the victim poor investment advice, the securities fraud lawyers at The Frankowski Firm work tirelessly to show where brokers have been fraudulent or negligent. Our legal team has won and obtained large results in numerous securities arbitration cases. We also bring claims in state and federal courts for violations of national and state securities laws. We work with financial professionals to determine when and how brokers who recommended penny stocks failed to meet their SEC obligation and when and how fraud occurred.

Does a broker have to comply with the rules of the Securities Exchange Commission (SEC)?

Section 15(h) of the Securities Exchange Act of 1934 requires that a broker-dealer must:

• Approve the investor for the penny stock transaction and get written confirmation from the customer approving the transaction.
• Provide the investor with a disclosure document that details the investment risks.
• Provide the current market quotation, to the broker, if the quotation is available.
• Inform the investor what commission the broker and the firm will receive on the penny stock transaction.

The broker also has a duty to provide monthly account statements stating the current market value of the penny stock after the sale is executed.