Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Running Your Business

FINRA Warns of Fraud Tied to Low-Priced Securities

Your article was successfully shared with the contacts you provided.

The Financial Industry Regulatory Authority is warning of potential fraud related to low-priced securities offerings — including those involving COVID-19- and cannabis-related businesses.

In the just-released Regulatory Notice 21-03, FINRA notes that it has observed “potential misrepresentations about low-priced securities issuers’ involvement with COVID-19 related products or services, such as vaccines, test kits, personal protective equipment and hand sanitizers.”

These misrepresentations, FINRA states, “appear to have been part of potential pump-and-dump or market manipulation schemes that target unsuspecting investors.”

The reg notice states: “Low-priced securities tend to be volatile and trade in low volumes. It may be difficult to find accurate information about them. There is a long history of bad actors exploiting these features to engage in fraudulent manipulations of low-priced securities. Frequently, these actors take advantage of trends and major events — such as the growth in cannabis-related businesses or the ongoing COVID-19 pandemic — to perpetrate the fraud.”

Firms that engage in low-priced securities business should also be aware of a recent SEC Staff Bulletin — Risks Associated with Omnibus Accounts Transacting in Low-Priced Securities — that highlights for broker-dealers various risks arising from illicit activities associated with transactions in low-priced securities through omnibus accounts, particularly transactions effected on behalf of omnibus accounts maintained for foreign financial institutions, FINRA explains.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.