What is a Penny Stock Email Campaign ?

Going Public Lawyers - What is a Penny Stock Email Campaigne?

In our digital age, sensible people know they should be wary of unsolicited financial advice, but there are still many who can’t resist the allure of the “guaranteed profits” that will be generated by a “once in a lifetime opportunity” received in a penny stock email campaign.  There are different kinds of scams involving penny stock email.  Some may present what appears to be an analysis of a specific penny stock company, and offer recommendations as well as price predictions or opportunities to get in on the ground floor of an investment.  Most penny stock email campaigns are in the form of an investment newsletter.

Whatever the type, some investment emails are legitimate, but many are created by investor relations firms to deceive investors into purchasing securities at inflated prices where penny stocks are concerned.  The authors and publishers of email campaigns often engage in illegal activity including:

• Touting:  promoting a stock without making proper disclosure of compensation paid.

• Pump and dump schemes:  driving a stock’s price up by making false and misleading positive statements about the company.  As more people buy, the stock rises and volume increases.  The promoters and their clients will sell on the way up and on the way down.

• Scalping:  recommending a stock while failing to disclose that the people making the recommendation or paying the investor relations firm to make the recommendation are selling their shares into the interest created.

• Undisclosed conflicts of interest:  falsely claiming to provide independent analysis, or failing to explain conflicts, including financial incentives, that may influence the recommendations they make about an issuer.

• False performance claims:  Misrepresenting the investor relations track record for “picks” or omitting information relating to its track record.

Investor emails may claim to be a source of unbiased information, but their publishers can still make a bundle on the trading activity of readers if they own stock in the companies they recommend.

When dealing with investor email campaigns that promote specific stocks, readers should make sure to read the disclosure information provided.  Claims of no compensation should be regarded with suspicion, and vague disclosures should also be seen as red flags.  They would include statements like:  “From time to time, the email may receive compensation from companies we write about”; or “From time to time, the investor relations firm or its officers, directors, or staff may hold stock in some of the companies we write about.”  Potential investors should also be wary if the email campaign provider tries to hide its disclosure information in an unobtrusive place, or offers it in print so tiny it can barely be read.

Investors should be aware that individuals and entities promoting stocks must declare the amount and kind of their payment, and name its source, if they wish to remain compliant with applicable regulations.

The agency also cautions the public to be wary of email campaigns that request personal information, and then have their own staff, or boiler room employees, make calls using hard sell tactics to pitch specific securities.

Potential investors should immediately reject any investor email promising implausibly high rates of return, exerting pressure to buy RIGHT NOW!, or if the scheme promoted just sounds too good to be true.

Anyone considering subscribing to an email newsletter or thinking of taking its recommendations seriously should investigate the publication and the people behind it.  The SEC advises that the public search its website and contact the appropriate state securities regulator to check for enforcement actions.  Some email newsletters are written by registered investment advisers; their background may be checked at the SEC’s IAPD page.  Unfortunately, where penny stocks are concerned most are not.

Investors should always conduct their own due diligence, and never rely on only one source of information about any potential investment.  The internet makes it very easy for fraudsters to reach out to hundreds of thousands of people with the click of a mouse, and just as easy to hide their own identities while doing so.  Extreme caution is advised.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, or to [email protected].  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected].  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855