I acknowledge that:
1. I have received and read the SEC’s publication titled Important Information on Penny Stocks available at https://www.sec.gov/investor/schedule15g.htm.
2. Investing in “penny stocks” (generally low-priced securities < $5) can be a high-risk, high-reward proposition;
3. I may lose most or all of my principal;
4. Penny stocks may have higher volatility and less liquidity;
5. Penny stocks are at higher risk for market manipulation and fraud (i.e. “pump and dump”);
6. Penny stocks have a higher risk of delisting.
Moomoo Financial Inc. is providing you with the following statement to alert you of certain risk factors associated with investing in penny stocks. It is essential to evaluate whether investing in penny stocks aligns with your investment objectives, risk tolerance, goals and financial situation.
The term “penny stock” generally refers to low-priced speculative securities (generally less than <$5 per share) of small companies. While penny stocks are generally quoted over the counter, such as on the OTC Bulletin Board or in the Pink Sheets, they may also trade on securities exchanges, including foreign securities exchanges.
It is important that you fully understand the risks involved in trading in penny stocks. Although not an exhaustive list, here are some significant risk factors associated that need to be considered when trading in penny stocks:
• High Volatility: Penny stocks are known for their extreme price volatility. Prices can skyrocket one day and plummet the next. This can make it difficult to predict price movements accurately.
• Lack of Liquidity: Many penny stocks are thinly traded, which means there may not be an active trading market for buying or selling shares. This lack of liquidity can make it challenging to close out positions at desired prices.
• High Risk for Fraud: The low price and lack of regulation make penny stocks more susceptible to market manipulation and fraudulent schemes (“pump and dump”). A "pump and dump" scheme is a type of securities fraud that involves artificially inflating the price of a stock through misleading or false information (the "pump") and then selling off a large number of those shares at the inflated prices (the "dump"). The goal of a pump and dump scheme is to create a false sense of excitement and demand for a particular stock, luring unsuspecting investors into buying shares at elevated prices.
• No Minimum Standards: Penny stocks typically do not meet the listing requirements of major stock exchanges, which have minimum standards for a company's financial health and reporting. This means you may be investing in companies with questionable fundamentals.
• Lack of Diversification: Concentrating your investments in a few penny stocks can lead to a lack of diversification, which increases risk to loss of principal. Diversification is a key principle in managing investment risk.
• Brokerage Fees: The cost of trading penny stocks can be relatively high when you factor in commissions and fees. This can limit your potential profits.
• Emotional Stress: The high volatility and potential for losses can be emotionally taxing. Emotional trading decisions can lead to significant losses.
• Delisting Risks: Penny stock companies that don't meet certain regulatory reporting requirements can face delisting, which can lead to substantial loss of value for investors.