Amazingly sufficient, various American financial sector stocks were thrown into penny inventory realm previously two weeks. In the past few months, even bigger banks declared bankruptcy.The SEC defines penny stocks as "low-priced (under $5), speculative securities of very small companies. Whereas penny stocks generally are quoted over-the-counter, equivalent to on the OTCBB or within the Pink Sheets, they may also commerce on securities exchanges, including overseas securities exchanges. As well as, penny stocks embody the securities of certain non-public companies with no energetic buying and selling market."By this definition, the financial sector stocks like Citibank and Financial institution of America, are penny stocks.Last fall, the SEC took the unprecedented motion of banning brief gross sales and calling for a brief cowl on financial sector stocks that taken a beating by the shorts. It's a lament that penny inventory companies have been complaining of for years, but went unheeded.And now these established, down-on-their-luck financial companies have satisfied the American public that they are deserving of billions in taxpayer dollars because they are established companies and never traditional penny stocks as outlined by the SEC.So what have we really executed for these behemoths? We have altered the definition of learn to invest to accommodate them. We have altered the extent taking part in discipline by exempting them from brief sellers. And now we're giving them tax dollars like some government sponsored clinic while laborious working entrepreneurs need to struggle for their place on this shrinking economy.Are these billion dollar bailout infants really that totally different out of your historically outlined penny inventory?Historically, threat traits attributed to penny stocks embody:1. Penny inventory companies are usually start-ups that lack of knowledge about the firm, its history and its management. I would argue that financial sector companies endure from the identical lack of transparency. In spite of everything, how may anybody not see the leverage and the misguided asset classifications and still put money into these behemoths? The derivatives are means too complicated for the layman to analyze. So we depend on the banks to inform us the reality, while they have a conflict.2. Large management blocks. Penny inventory firm founders historically have a large block of inventory (albeit restricted) to ensure their pursuits are aligned with the remainder of the shareholders while ensuring they can not promote their shares for a quick profit at the detriment of other shareholders. Within the financial sector, these large blocks are held by fund managers who similarly cannot promote their blocks quickly with out decreasing the market value and thereby impairing the return to themselves. What's extra, the CEO's of the companies barely have any inventory in their portfolios, eliminating the alignment with shareholder values. As an alternative, it's turn into vogue to pay these CEO's by way of inventory options, giving them an incentive to point out brief term results and then cash out their options while the remainder of the investing public holds shares that were bought by insiders.That is executed through the use of unwitting brokers, paid analysts and unquestioning media to tow the company line. And since the CEO's and the companies have been held in excessive esteem, no one questions using these tools or their motives.Penny inventory companies typically use related tools. Solely with a penny inventory it's called inventory promotion. And penny inventory companies have higher motives: with out inventory promotion, one of the best firm on the planet will not be price something because no one would have heard of it - and therefore the enterprise would be laborious pressed to boost money for growth. Promotion needs to be a driving funding criterion for choosing a penny stock.The difficulty with promotion is that the SEC typically believes that inventory promotion involving a penny inventory needs extra supervision than the promotion being carried out by billion dollar home hold names. Is there the truth is an opportunity for fraud within the penny inventory market? In fact there is.However I contend that the danger is way increased with effectively established companies that have CEO's holding inventory options (huge motive for early liquidation since options expire) reasonably than actual restricted inventory (unsellable) for which they really paid (as many penny inventory companies expertise). Empirical proof is offered by the billions misplaced within the financial sector right beneath the nostril of, and with the blessing of the SEC and other regulatory our bodies than has ever been misplaced on penny stocks.3. Penny stocks are often accused of being used by scam artists who promote them by way of spam electronic mail or off-shore brokers. Because the current IRS/SEC probes have confirmed, many, many, many American CEO's have offshore accounts making them no extra trustworthy or dishonest than the operators of penny inventory companies.Each traditional penny inventory startups and the fallen as exemplified by the financial sector have the potential for growth and for fraud. Each are blighted by cash necessities, by brief sellers and by picture problems.The distinction is that the fallen companies have the government and SEC preventing for them while the standard startup penny inventory firm is vilified. The dichotomy is much more surprising once we cease to assume that economists have long been telling us, and the American expertise has long proved that the beginning-up is what drives the economic system, diversifies the job base, creates essentially the most jobs and is lean sufficient to benefit from altering times.So I ask you America: Are all Penny Stocks Created Equal?We consider that investing in effectively chosen, effectively researched penny stocks offers a superior return to investing in mainstream equities. Our proprietary system not solely evaluates a company within the traditional sense, but also provides importance to the inventory promoter promoting the company. We also all the time hire outside impartial research within the form of a CFA report to ensure we've missed nothing.Penny stocks offer some great benefits of low value, excessive inside ownership, the absences of the flexibility to brief and of spinoff manipulations. In brief, they are extra transparent. The disadvantage of low visibility is over come by the choice of the best promoter. Our years of expertise on this business has allowed us to determine good promoters from bad...the truth is we make out there a publication that reveals anybody how you can "Spot a Good Promoter".