April 16, 2024


SEC Commissioner Hester Peirce has expressed her dissenting stance on the Commission’s latest decision to impose permanent penny stock bars on four respondents involved in adjudication matters. This sentiment was publicized in her tweet on June 28, along with a link to an official statement explaining her position.

Peirce expressed concern in her tweet, stating, “Protecting investors is important, but the government needs to have a good reason to prevent people from investing their own money as they choose.” Penny stocks, often known as micro-cap stocks, are publicly-traded shares of small companies that typically trade for less than $5 per share. Due to their low price and high volatility, they are often considered a high-risk investment. The statement attached to the tweet highlighted the complexity of the issue at hand.

Titled “Perpetual Personal Penny Stock Prohibitions: Statement on the Recent Orders Imposing Bars in the Public Interest,” the statement gave insights into the reasons behind Peirce’s objections.

According to the Commissioner, the records for the cases in question failed to demonstrate that the decision to impose an absolute and perpetual penny stock bar on each respondent was in the public interest. She emphasized that administrative proceedings, such as the ones at issue, should be remedial and not punitive in nature.

The Commission’s orders, as Peirce highlights, prohibit the respondents from participating in any offering of a penny stock, including acting as a promoter, consultant, or agent, or even from inducing or attempting to induce the purchase or sale of any penny stock. This prohibition also extends to the respondents trading in penny stocks in their own accounts with their own money.

Peirce emphasized her disagreement with the broad penny stock bars, citing that they are missing an adequately explained link between the need for the bars and the facts of the cases. Moreover, she clarified that none of the respondents’ unlawful conduct involved penny stocks. Therefore, it is not clear how such prohibitions will protect the public interest.

Finally, Peirce suggested the implementation of narrower penny stock bars, which could serve the public interest by preventing respondents from using other people’s money and accounts to trade in penny stocks, while preserving their right to engage in lawful economic activity with their own money.

This recent discussion spearheaded by Commissioner Peirce sheds light on the grey areas of penny stock regulation and the need for careful scrutiny of each case. It further underscores the ongoing debate surrounding the government’s role in guiding investment choices.





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