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Penny stocks and other over the counter securities those that are traded in pink sheets and the over the counter bulletin board (OTCBB). Pink sheets are not governed or owned by NASDAQ or any other SEC-registered stock exchange companies, while the OTCBB is operated by NASDAQ.

Companies that are listed on the Pink Sheets are relatively new companies who are just starting up and have not yet developed to meet the requirements needed to be publicly listed. Back then, the companies listed in Pink Sheets offer no information about their company, nor do they disclose their financial condition because they are not required to do so.

To help investors make sound investment decisions, Pink Sheets introduced a classification system that helps them sort the companies by the amount of information they are offering. This will leave the investors a pool of companies who are giving out important and credible information. This move is to give advantage to the investors so that they will minimize the possibility of being victim to a scam and can also lead them to make good decisions.

The classification system categorizes companies into three groups: PremierOX, PrimeOX and International OTCQX. PremierOX is the first classification, companies included in this group offer shares for at least $1 per share, and have at least 100 shareholders with a minimum of 100 shares each. The companies under this group also meet the important requirements needed to participate in the major stock exchange companies.

The second classification is PrimeOX; this level is quite the same as PremierOX. The only main difference is there is no minimum price for the stocks offered and only 50 shareholders with a minimum of 100 shares each will be given entry.

The last level is the International OTCQX, which is a classification for international companies. Under this category, there are two sub-categories which are International Premier OTCQX and International Prime OTCQX. The basic requirement for an international company to be included in this category is for them to meet the requirements needed to be listed in their home country’s stock exchange. As an additional requirement, their filings must also be available in English.

People are investing in Pink Sheets and Penny Stocks because it is very cheap, investors can get in very easily in these markets. Because of the easy access, a lot of scammers are taking advantage of this. The first thing that you need to do to avoid falling prey to scams is to research about the company and get to know its background. If a company wants to be listed in Pink Sheets, all it needs to do is to enlist the services of a market maker or broker to get their shares quoted.

No financial report submission is required, so it is a haven for fake and phony companies. Since Pink Sheets would not be able to offer you vital information, take it upon yourself to get to know more about the company before you invest.

Before entering into any investment deals, due diligence is important. You have to be very vigilant and always be on the lookout for companies who are looking for their next victim. If you are well-informed, you will have an easier time in finding good companies which you can invest in and can possibly make you financially wealthy.