Page 27 - Provoke Magazine Vol4

The more stock purchases made the more the stock price will increase allowing the stock manipulators to sell their holdings at a higher price. The unsuspecting investors continue to buy the stock at the inflated price because they see the price continue to rise. As the price falls because of the new sale activity, some investors will continue to buy believing that the stock will turn around.
Penny stocks are associated with account churning. Stockbrokers participating in these types of schemes will also benefit in the commissions earned from stock buys and sells. In the Wolf of Wall Street, Jordan Belfont is seen selling penny stocks out of a warehouse where he learns just how much money one can make in the stock market. The low-priced securities are an easy sell for his high-pressure sales tactics encouraging ordinary people to become stock investors on an undervalued opportunity.
The opportunity for these short wins to capture small profits result in ongoing transaction fees for the broker. As investors attempt to profit from buys and sells, they execute costly transactions through stock orders. In- stead of riding out the volatility without action the in- vestor captures the short-term gain and uses the cash to try to buy the same or different stock when the price drops. Buying low and selling high reaping the gain and
then using the gain to repeat the action. With each exe- cution, the investor pays the stockbroker.
In a recent action against Wall Street, regulators sanc- tioned Alteris Group for penny stock manipulation and fraudulent sales practices. The sanction names the compliance officers who failed to identify red flags that would alert them to the wrongdoing. Individuals who did not get named in the action were the stockbrokers who perpetrated the fraud.
The lack of reprimand means that bad financial advi- sors are free to go to other firms and commit the same offenses. FINRA advises investors to check the FINRA website for abuses which have occurred in the past. What good does this do when the wrongdoing gets tied to the firm and not the individual?
Penny stock manipulation begins with some idea to make more money. It is a gamble that requires an initial deposit of personal benefit and the belief that you can have more. Unlike its name, penny stocks cost more than a penny. These investments are highly speculative and with a small amount of money, there is the poten- tial to earn a hefty profit. The more you purchase the more you can earn or lose. Like the one arm temptress of the late-night casino, it is a gamble that relies on your willingness to believe.
Information contained herein should not be considered as investment advice or a recommendation of any strategy or investment product. To report concerns with elder abuse and financial exploitation and investing contact the Financial Industry Regulatory Authority Securities Helpline for Seniors at www.finra.org.
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