The SEC Office of Investor Education and Advocacy issued an Investor Bulletin, "Microcap Stock Basics," the first of three providing a general overview of microcap stocks and their marketplaces, a list of sources to research microcap stocks, and a list of "red flags" and other factors for investors to consider regarding microcap stocks.
The Investor Bulletin defined "microcap stocks" (sometimes referred to as "penny stocks") as being companies with low or micromarket capitalization (less than $250 or $300 million).
The Investor Bulletin listed the following over-the-counter ("OTC") market platforms where microcaps trade: (i) OTC Bulletin Board, (ii) OTC Link LLC, and (iii) Global OTC.
Finally, the SEC Office explained that microcap stocks differ from other stocks because they: (i) tend to lack reliable publicly-available information; (ii) generally do not have to meet any minimum listing standards (albeit they are typically subject to some initial and ongoing requirements); and (iii) are "among the most risky" of investments.
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