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RAISING STANDARDS
Raising Standards of Cross-Border Cooperation
The FSD has launched an initiative to raise the standards of cross-border cooperation among securities regulators. FSD objectives are to protect investors, to ensure fair, efficient and transparent markets and to reduce systemic risk.
 
What we do ?

The Financial Services Department is established to promote investor confidence in the securities and capital markets by providing more structure and government oversight.

The mission of the Financial Services Department is to protect investors and maintain integrity of the securities industry, overseeing major participants in the industry, including stock exchanges, broker-dealers, investment advisors, mutual funds, and public utility holding companies.

Financial Services Department is concerned primarily with promoting disclosure of important information, enforcing securities laws, and protecting investors who interact with these various organizations and individuals

 
Penny Stocks
 

Penny stocks are low-priced stocks that typically start out at less than one dollar per share. They are sold on the premise of significant potential growth.

Very often, companies issuing penny stocks are new to the market. They may not have been in business long enough to establish a proven track record or credible financial history. Another characteristic may be an inexperienced management team. These factors undermine market reception and the ease with which penny stocks can be traded.

Anyone investing in penny stocks should be aware that - when they may want to sell his or her stock - a market may not exist. Penny stocks are 'priced low' for a reason.

Despite their bargain basement price, penny stocks are high risk. Unless you have the financial resources to withstand the loss of your initial investment and target returns, penny stocks are not for you.

Get the Facts

Why is it so important to get the facts?

Penny stocks are extremely vulnerable to manipulation. Promoters intent on misleading or defrauding investors are counting on you not to do your homework.

A common scam is the "pump and dump." In this situation, a promoter accumulates an inventory of penny stocks. Using high-pressure sales techniques, the stock is 'pitched' to clients. Clients (or investors) are found by any means in the interest of making a market. In the course of events, the price of the penny stock will rise (possibly to several dollars per share). As long as the promoter is able to locate new investors or encourage current clients to increase his or her holdings at a higher price, the scam continues. All the while, the promoter profits. When the scam has run its course, the stock becomes illiquid and the price falls. Hapless investors are left holding the now-worthless stock.

Where to Go for Information

Unscrupulous promoters are inventive and persistent. Using any means possible, they may spread false information. It pays to double-check their claims through other sources.

Corporate information comes in many forms including:

  • Annual and quarterly reports

  • Financial statements

  • Prospectuses

These can be obtained from the public library system, your dealer or adviser, and stock exchanges.

Stock exchanges have minimum listing requirements that a company must meet before its securities can be traded on that exchange. Among other things, these requirements relate to a company's finances, management, and share ownership. If a company is not able to meet these minimum requirements, they may trade on the over-the-counter market. The over-the-counter markets consist of a network of dealers who trade among each other either on behalf of individual investors or themselves.

The Changing Markets

Traditionally, penny stocks trade on junior exchanges or over-the-counter markets. Investors benefit from a well regulated, fair and accessible market with enhanced protection through uniform regulatory standards, consistent enforcement, and improved market information.

How Will I Recognize a Penny Stock Scam?

There are a few tell-tale signs:

  • Unsolicited telephone calls. Be skeptical of an unknown salesperson calling to offer you "a fantastic investment opportunity

  • High-pressure sales tactics. Do not be pressured into making hasty investment decisions

  • Promises of a great rate of return. No dealer or adviser can guarantee an exceptional rate of return, and the law prohibits promises of such future returns

  • Claims of little or no risk. If the projected rate of return is high, the associated risk is likely to be high as well

  • Offers to discount commissions. Commissions that are charged for sales of penny stocks are often at rates higher than normal

  • Claims of "inside" information. It is illegal to trade on the basis of confidential or "inside" information. The penalties of insider trading can be severe

  • Reluctance to provide shareholder information. A salesperson should not hesitate to provide you with the information, which may include a prospectus that is necessary for you to make an informed decision
 
Due-Dilligence / Probity
As an overseas financial services regulator you may seek information from Financial Services Department as part of your licensing or registration processes. Financial Services Department supports this regulator-to-regulator practice as part of our functions of monitoring and promoting market integrity and consumer protection in relation to the International financial system.
 
Financial Services Department
If you haven't found the information you need on our website or public registers you can make a probity request for confidential information. We release confidential information in accordance with our statutory obligations, which are outlined in Regulatory Guide 103.
 
Overseas Regulator
FSD's website can provide you with useful information that will assist you with your licensing or registration processes. You can access information contained in the public registers through our website. For example, you can confirm that a person or company holds an International financial services licence or is a banned and/or disqualified person.
 
Probity Check
FSD applies certain thresholds, to determine whether it is appropriate for us to respond to a probity check request.
 
 
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