involve losses of tens of millions of dollars. The penny stock market has little liquidity, so holders of shares in penny stock companies often find it difficult to cash out of positions. However, academic research shows that the risk created by small market cap size and lower liquidity results in higher expected returns due to the size and liquidity premiums. In the United States, the SEC and the Financial Industry Regulatory Authority (FINRA) have specific rules to define and regulate the sale of penny stocks. Concerns for investors There are inherent concerns that individuals should be aware of when investing in penny stocks, namely the lack of information that often exists surrounding the companies offering said stocks. The lack of public reporting mixed with a thin market is often the perfect recipe for stock manipulation via stock promoters. A common practice is for these individuals to purchase large quantities of stock and then utilize promoters to artificially inflate the sub-penny stock’s share price, through false and misleading information. When the liquidity and price increase the manipulator will sell their stock, this is called a "pump and dump" scheme which is a form of microcap stock fraud. On April 3, 2017, the Federal Bureau of Investigation (FBI) reported on a story in which penny stock fraud was the focal point of the piece. According to the article, California resident Zirk de Maison was found guilty of conducting a "pump and dump" scheme, during the course of which de Maison and his associates convinced large groups of investors to purchase shares of companies that he had set up as shell organizations. From 2008 to 2013, de Maison created five small public companies which, unbeknownst to the investing public, did no actual business and had no legitimate assets. Once he set these companies up, he offered public shares of the company’s penny stocks for investors to purchase. According to the FBI investigation, de Maison would use fictitious names to convince investors to purchase shares of his shell companies, thus driving up the price of his shares and giving the illusion that investors were realizing profit. Once these prices went up, de Maison and his original conspirators would then liquidate their shares at the stock's highest level, and this mass selling caused the shares to drop dramatically, leaving investors with near-worthless shares. In more sophisticated versions of the fraud, individuals or organizations buy millions