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Microcap Fraud

While large companies with high priced stocks often trade on major exchanges, smaller companies with fewer assets and lower stock prices trade their stocks on the over-the-counter (OTC) market, which is commonly referred to as the microcap market. Unlike the major exchanges, the OTC does not require companies to go through a formal application process or meet minimum listing standards. For these reasons, it is often easier for companies to commit fraud on the OTC than it is on larger, more regulated stock exchanges. Unfortunately, many people are unfairly accused of microcap fraud on a yearly basis, which can have devastating consequences for a person’s business interests, financial situation, and reputation. If you are being investigated for microcap fraud or another fraud-related offense, it is critical to speak with an experienced white collar crime attorney who can defend your interests.

Microcap Stock

Microcap stock is offered by companies that have limited assets and operations. For this reason, microcap stocks tend to be lower priced and traded in low volumes as compared to stocks traded on larger exchanges. Microcap stocks also differ in other significant ways from more typical stocks. For instance, most large companies are required to file reports with the Securities and Exchange Commission (SEC) before they can offer their stocks publicly. These reports then become available to investors. Furthermore, information about microcap stocks, is much more difficult to find, which can make them vulnerable to investment fraud. Stock traded on large exchanges must also meet minimal listing standards regarding the amount of the company’s net assets as well as the number of shareholders. Companies that trade on the OTC typically do not have to meet any minimum standards, although they are subject to some initial requirements.

For these reasons, microcap stocks are often considered a risk for investors and are more susceptible to fraud. In an effort to prevent fraudulent activity, the SEC aggressively prosecutes those accused of committing this type of fraud by filing claims asserting violations of the Securities Exchange Act. Conviction under this statute is punishable by fines of up to $ 5 million and 20 years in prison. Fortunately, there are a variety of defenses available to those accused of committing microcap fraud, including lack of intent and lack of knowledge.

Contact us Today to Speak With an Experienced White Collar Crime Attorney

Being convicted of a fraud-related offense can have serious consequences, including serious civil penalties, such as hefty fines and even jail time. Having the advice and guidance of an experienced attorney can make all the difference in the outcome of a case, so if you live in south Florida and are being investigated for or have been accused of committing microcap fraud or another fraud-related offense, please contact the law firm of Jeffrey S. Weiner, P.A., Criminal Defense Attorneys by calling (305) 670-9919 or by initiating a live chat with a skilled white collar crime attorney who can help you schedule a free case evaluation.

Resources:

sec.gov/investor/pubs/microcapstock.htm#WhatIs

gpo.gov/fdsys/pkg/CFR-2014-title17-vol4/xml/CFR-2014-title17-vol4-sec240-10b-5.xml

law.cornell.edu/uscode/text/15/78ff

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