Penny Stocks and Associated Rules

What this video covers

• The two-part penny stock definition: unlisted AND below $5 per share, and why exchange listing alone disqualifies a stock regardless of price
• The three definitional exemption thresholds based on net tangible assets ($2 million for 3+ years, $5 million for less than 3 years) and average revenue ($6 million over 3 years)
• The four mandatory pre-trade disclosures: risk disclosure document, current quotation disclosure, two-part compensation disclosure (firm aggregate and associated person's), and signed suitability statement
• Why the 2-business-day waiting period applies to both the risk disclosure document and the suitability statement after documents are sent, not after signing
• The critical exam trap that established account (1+ year) and prior transaction (3 separate days, different issuers) exemptions apply ONLY to the suitability statement, not to the other disclosures
• The three conditions for full exemption from all penny stock rules: unsolicited trade, institutional accredited investor, or issuer insider status
• The supervisor review requirements for OTC equity recommendations, including balance sheet age limits (15 months domestic, 18 months foreign) and additional profit and loss statement triggers