The smaller companies listed on a public market will offer what are known as “penny stocks”. For investors looking for diversification by investing in a high-risk/pressure environment penny stocks might be the right course. Penny Stocks usually rise and fall very quickly and while quick profit can be made at times, there is a great risk of losing the entirety of the investment.
Before entering into any deal, make sure that you understand everything regarding investment and that the financial service you will be able to sell your shares. Do not be afraid to ask regarding the commission that will be taken from the sale, if the broker hesitates in answering the question, this should be seen as a red flag. Also inquire how the broker plans to sell the penny stock and how long you should expect to hold on to the stock. Non-registered brokers may contact you and use pressure tactics via phone, email and fax in an attempt to convince you to buy a penny stock, it is important to check with the FFMA to ensure that every company your trade with is authorized by us.If at any point you feel the firm is not being honest with you, cease to do business with them. If you feel that the concerns and risks were not properly explained and the broker refuses to rectify the situation, demand a copy of the original conversation and forward it with all relevant details to the FFMA broker complaint department.