A chop stock is an equity, usually trading trading on the OTCBB or Pink Sheets listing services, that is sold by unscrupulous stock brokers to unsuspecting retail customers at a considerable commission, often as high as 50%. The penny stock being promoted typically has few financial prospects and a large share float. Normally the share price will collapse when the promotion ends, leaving investors penniless. The OTC Bulletin Board is a stock market for companies to list shares which either do not meet the capitalization, ownership, or other requirements of major stock exchanges, or for companies who do not choose to have their shares listed on such exchanges. ... Pink Sheets is an electronic system, published by Pink Sheets LLC, to display bid and ask quotation prices. ... In the U.S. financial markets, the term penny stock commonly refers to any stock trading outside one of the major exchanges (NYSE, NASDAQ, or AMEX), and is often considered pejorative. ...
This scam differs from a pump and dump in that the brokerages make money not by unloading their own shares at overvalued prices, but by marking up the stock's price before they sell it to the victimized investors. These shares are often acquired at a discount to the fair value, through Regulation S or Rule 144, and sold illegally in violation of the equity's lock-in period. The night singer of shares sold stock on the streets during the South Sea Bubble. ... It has been suggested that this article or section be merged with Securities Act of 1933. ... It has been suggested that this article or section be merged with Securities Act of 1933. ...
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