From the SEC: Micro-Cap Fraud

Information is the investor's best tool when it comes to wise investing. But accurate information about "micro-cap stocks"—low-priced stocks issued by the smallest of companies—may be difficult to find.

Many micro-cap stocks trade in the over-the-counter market and are quoted on OTC systems, such as the OTC Bulletin Board (OTCBB) or the Pink Sheets.

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But many micro-cap companies do not file financial reports with the SEC, so it's hard for investors to get the facts about the company's management, products, services, and finances. And while many of the companies that don't file reports with the SEC are legitimate businesses with real products or services, the lack of reliable, readily available information about these kinds of companies can open the door to fraud.

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