Office of Compliance Inspections and Examinations

Fixed Income Market Structure Advisory Committee

Short and Long-Term Management of Public Companies

Small Business Capital Formation Advisory Committee

Fixed Income Market Structure Advisory Committee

Short and Long-Term Management of Public Companies

Small Business Capital Formation Advisory Committee

The over-the-counter (OTC) market for securities, often referred to the microcap market, is designed for and comprised of companies with small amounts of assets and low stock prices. More than 10,000 companies have shares that trade on the OTC markets two inter-dealer quotation systems:  the OTC Bulletin Board (OTCBB) and OTC Markets Group, Inc. (f/k/a Pink Sheets). While companies that trade their stocks on major exchanges undergo a formal application process and must meet minimum listing standards, companies quoted on the OTCBB or the OTC Markets do not have to apply for listing or meet any minimum financial standards.

How Are Microcap Stocks Different from Other Stocks?

How Do I Get Information About Microcap Companies?

Watch out for these Red Flags when investing in Microcap Stock

Odd Items in the Footnotes of Financial Statements

To invest wisely and avoid investment scams, research each investment opportunity thoroughly and ask questions. These simple steps can make the difference between profits and losses:

Find out whether the company has registered its securities with the SEC or your states securities regulators.

Make sure you understand the companys business and its products or services.

Read carefully the most recent reports the company has filed with the SEC and pay attention to the companys financial statements, particularly if they are not audited or not certified by an accountant. If the company does not file reports with the SEC, be sure to ask your broker for whats called the Rule 15c2-11 file on the company.

Check out the people running the company with your state securities regulator, and find out if theyve ever made money for investors before. Also ask whether the people running the company have had run-ins with the regulators or other investors.

Make sure the broker and his or her firm are registered with the SEC and licensed to do business in your state. And ask yourstate securities regulatorwhether the broker and the firm have ever been disciplined or have complaints against them.

These data are based on analysis by the Division of Economic and Risk Analysis (DERA) of over 4,000 litigation releases over 2003 to 2012 (available at

The x-axis depicts the first year of the alleged violation period.

Groups are based on the primary classification of the alleged violation.

This chart includes alleged violations committed by parties unrelated to the OTC-traded issuer.

SEC Brings New Charges in Multimillion Dollar Boiler Room Schemes

SEC Charges Securities Lawyer and Microcap Agent with Fraud

SEC Charges Broker-Dealer and Transfer Agent in Microcap Shell Factory Fraud

SEC Files Charges in Elaborate Microcap Stock Fraud

Brokerage Firm to Exit Penny Stock Deposit Business and Pay Penalty for Repeatedly Failing to Report Suspicious Trading

Investor Alert: Marijuana Investments and Fraud

White Paper: Outcomes of Investing in OTC Stocks

Investor Alert: Investment Scams Involving Ebola-Related Companies

Orchestrator of Microcap Fraud Scheme Barred from Penny Stock Offerings and Ordered to Pay $80,000 Penalty

SEC Halts Microcap Fraud Scheme Orchestrated Through International Accounts

SEC Charges Company Insider with Multiple Frauds

SEC Charges Florida Microcap Company, CEO and Consultant with Fraud

SEC Obtains Consent Judgment Against CEO in Penny Stock Fraud Scheme

SEC Charges U.K. Brokerage Firm, Investment Manager, CEO, and Others for Manipulative Trading in U.S. Microcap Stocks

Promoter in Securities Kickback Scheme Barred from Penny Stock Offerings

SEC Charges Transfer Agent and Its Principal with Fraud for Misappropriating Client Funds

SEC Charges Florida Penny Stock Operators With Defrauding Elderly Investors in Push to Crack Down on Repeat Offenders