SEC Commissioner Hester Peirce expressed her dissenting position on the Commission’s latest decision to impose permanent penny bars on four defendants involved in adjudication matters. This sentiment was posted on his cheep on June 28, along with a link to an official statement explaining his position.

Peirce expressed concern in his tweet, stating: “Protecting investors is important, but the government must have a good reason to prevent people from investing their own money however they choose.” Penny stocks, often known as micro-cap stocks, are publicly traded shares of small companies that typically trade for less than $5 per share. Due to their low price and high volatility, they are often considered a high-risk investment. The statement attached to the tweet highlighted the complexity of the issue at hand.

Titled “Perpetual Bans on Personal Penny Stocks: Statement on Recent Orders Imposing Bans in the Public Interest,” the statement provides insight into the reasons behind Peirce’s objections.

According to the Commissioner, the records of the cases at issue did not demonstrate that the decision to impose an absolute and perpetual penny stock bar on each defendant was in the public interest. He emphasized that administrative procedures, such as the ones at hand, should be restorative and not punitive in nature.

The Commission’s orders, as Peirce points out, prohibit defendants from participating in any penny stock offering, including acting as promoter, consultant, or agent, or even inducing or attempting to induce the purchase or sale of any penny stock. This ban also extends to respondents who trade penny stocks in their own accounts with their own money.

Peirce emphasized his disagreement with the broad bars of penny stocks, citing that there is a lack of a properly explained link between the necessity of the bars and the facts of the cases. In addition, he clarified that none of the defendants’ wrongdoing involved penny stocks. Therefore, it is not clear how such prohibitions will protect the public interest.

Finally, Peirce suggested the implementation of narrower penny stock bars, which could serve the public interest by preventing respondents from using other people’s money and accounts to trade penny stocks, while preserving their right to participate. in legal economic activities with their own money.

This recent discussion led by Commissioner Peirce sheds light on the gray areas of penny stock regulation and the need for careful scrutiny of each case. Furthermore, it underscores the ongoing debate around the role of government in guiding investment choices.