During the recent months, there has been unprecedented market activity and volatility worldwide, including in U.S. microcap penny stocks. These stocks are especially risky due to the lack of liquidity, public information, and extreme volatility. Many microcap companies are new and don’t have any proven track record. That said, the recent trading frenzy has triggered concerns and investigations from regulators, and liquidity providers.
When there’s a sudden influx of orders for a certain microcap security, it triggers an investigation for market manipulation and could lead to a potential suspension of the stock. Even when there’s no evidence for misconduct, brokers have to take care that the traded volumes are not disproportionate to the normal activity.
Based on the above, we are required to temporarily suspend the purchasing of penny stocks that are highly illiquid and have a market cap in the tens of millions. If we don’t do so, we risk being suspended by both the relevant exchanges and market makers.
The above is beyond our control and we have to comply with the regulations.
The huge inflow of new retail investors is an unprecedented phenomenon for the financial markets. Brokers, market makers, regulators and even exchanges are still trying to navigate this new environment. We will continue pushing forward to provide as much trading freedom as is possible within the regulatory framework.
A notice indicating that the purchasing is suspended will be placed on each of the affected stocks.