FINRA Releases Regulatory Notice on Policies and Procedures Relating to Fraud Involving Low-Priced Securities
On February 10, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 21-03 (the Notice) urging member firms to review their policies and procedures with respect to red flags of potential securities fraud involving low-priced securities. Given that low-priced securities tend to be volatile and trade in low volumes, it may be difficult to find accurate information regarding such securities. As a result, low-priced securities are vulnerable to fraud and market manipulation, especially with respect to COVID-19-related products or services.
The Notice provides information that may help FINRA member firms that engage in low-priced securities business assess and, as appropriate, strengthen their controls to identify and mitigate their risk, and the risk to their customers, of becoming involved in activities related to fraud involving low-priced securities.