INVESTOR ALERT

back to list

  Penny Stock Alert

Investigate before you consider buying penny stocks.

There are broker dealers who do telephone marketing to identify prospective buyers. These prospects are turned over to the professional sellers who can sound very convincing with the offer to help you invest in stocks that will grow. 

There is a well known practice of penny stock dealers buying up worthless shares for pennies and then promoting them to unsuspecting investors. The broker dealer sells these stocks as principal at prices which are determined by his marketing program. The shares have little inherent value.

These stocks may be traded over the counter so that prices are quoted in the media which lends an air of legitimacy to the claims of the sellers.

Through their marketing the price of the shares appears to increase over a period of several months until the broker dealers have sold all of their shares. Then the price collapses. Small investors lose!

The OSC has put several of these penny stock dealers out of business; E.A.Manning Ltd. in 1985, Marchment & MacKay in 1999, and several more in 2000.

How Can You Protect Yourself?

1. Don't buy penny stocks unless you do sufficient research!
2. Ask yourself why anyone you don't know would call you to sell you a penny stock unless he stands to gain from selling it to you.
3. Read the settlement agreement between the OSC and Norm Frydrych, a former representative of a penny stock dealer,  to understand how penny stock dealers operate and why you can't win.

Archive Reference

99/03/30 - "Marchment a lesson for penny stock players" - James Daw wrote an article in the Toronto Star on March 30, 2000 that outlines the Marchment & MacKay situation.
99/03/28 - OSC charges A.C. MacPherson - Investors lose with Complex Minerals Corp. and Heartland Resources Inc.