Regulatory Outlook | 02.17.21
FINRA Warns of Fraud Tied to Low-Priced Securities
The Financial Industry Regulatory Authority (FINRA) has released a regulatory notice warning of possible fraud connected to low-priced securities. In Regulatory Notice 21-03, the regulator says 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.” FINRA says the misrepresentations “appear to have been part of potential pump-and-dump or market manipulation schemes that target unsuspecting investors.” The regulatory notice adds that low-priced securities can be volatile and trade in low volumes. As a result, it can be challenging to find accurate information on them. In the past, there have also been several bad actors that exploit these attributes to defraud people. It is common for these companies to take advantage of trends and major events like cannabis-related businesses or the coronavirus pandemic.
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