Listing on the over-the-counter market, such as bulletin boards, can be risky due to lighter regulation and higher fraud potential. While cheaper prices may be tempting, investors should be wary of potential scams and consider the lack of specific listing requirements.
The stock market offers countless options to investors and to companies that issue capital to the public. Among those options is where to list the values for trading. Issuing companies may not be qualified to list shares on a formal stock exchange where traditional regulation and recognition can be achieved. Instead, issuers could list shares on the over-the-counter market, where a new issue becomes an announcement exchange for investors to trade. Regulation is less pervasive, price guarantees are more opaque, and fraud is more likely to occur in the over-the-counter market.
Any investor would benefit from selecting the next growth stock that offers future earnings from a company that continues to generate higher earnings. A bulletin board stock could offer insight into a company that will become the next industry leader. Investors are often drawn to the prospects of such an investment because the price of shares on a bulletin board can be extremely cheap. However, there are serious risks associated with such investments, and market experts often suggest that investors be wary of these securities.
Chief among the risks associated with stocking a bulletin board is the possibility of fraud. Lighter regulation alone makes it easier for investment scams to occur. A stock that is listed on a major exchange, such as the New York Stock Exchange, Euronext, or the Nasdaq Stock Market in the US, must meet specific listing requirements to sell shares on these platforms. Those same standards do not exist in the over-the-counter market. In fact, a company that once met the listing requirements of a major exchange, but then fails to meet the same standards over a period of time, is typically delisted from the exchange and falls into board status. ads for trading on the market counter.
Since a stock price from a bulletin board tends to be cheaper compared to a security listed on a major exchange, the possibility of fraud is higher. For example, unethical market participants might buy a bulletin board stock in large numbers to illustrate the high demand for this security to other investors. Subsequently, other investors could invest in shares, which would further push the price up based on the assumption that there is high demand and the price will continue to rise. Meanwhile, the fraudulent individual can sell large amounts of stock cheaply and profit from the transaction, leaving other investors with little recourse.
Smart Asset.
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