Is The End Of The Penny Stock Market Imminent?

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Is The End Of The Penny Stock Market Imminent?

In September, Bank of America banned trades of all microcaps with stock prices under $5. For some, this signaled the end of the penny stock market and prompted Richard Levick to share an article on titled “The End Of The Penny Stock Market Could Be Imminent.

According to Levick, “If enough other financial institutions follow suit, the penny stock market could disappear altogether. As of this writing, Morgan Stanley and UBS have not followed Merrill’s lead, according to sources cited by CNBC reports, but investors sense a chill wind has begun to blow.

Bank of America’s move impacted all stocks with market caps under $300 million and share prices under $5, essentially all microcap stocks with a few exceptions.

While FINRA and the SEC say they want to increase capital formation for small companies, they have continued to take steps to make it increasingly difficult for brokerages and clearing houses to operate in the space.

As compliance burdens continue to grow, both small and large firms have exited the microcap business.

In September, COR Clearing was essentially forced to exit the microcap space by the SEC. According to the SEC, COR ranked second in 2016 among all broker-dealers in the total dollar value of sub-$1 penny stocks that it cleared.

What do you think? 

Is The End Of The Penny Stock Market Imminent?

Are regulatory firms chasing firms out of the microcap space intentionally or unintentionally? 


Read the entire article on Forbes HERE.



  • Actually, IMHO one of the main causes of this is 1000’s of toxic convertible notes issued by companies trading under $1.00 on the OTC Markets with no conversion floors, the incessant conversions driving stock price and shareholder values down, investigations by the SEC and FINRA into OTC stock clearing houses and lawsuits alleging state court criminal usury violations to contesting whether these notes are actually securities entitled to be traded after 180 days under an exemption under Rule 144. IMHO these note transactions destabilized the entire OTC marketplace by dancing along a very fine legal line of legitimate funding instruments – because the only ones that make money on these transactions are the lenders. You will be hard-pressed to find a company where toxic note’s actually improved stock price and shareholder value. Email me if you find one.

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