Articles Posted in FAQ’s’

Understanding Margin –

Margin is borrowing money from your broker to buy a security and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more securities without fully paying for it.  The amount owed to the broker is called the debit balance.  Through the use of leverage, investors attempt to magnify gains on actual cash or collateral deposited into their accounts.  But at the same time, the use oft margin exposes investors to the potential for higher losses.  Another reason for borrowing money from brokers is the feature involving a no-repayment-date loan.  This feature is generally not available through other types of lending institutions, including banks.  The no-repayment feature, although very attractive, can be fraught with danger.  The investor should be made aware that if the value of securities on deposit with the broker declines substantially, the broker will require additional funds or collateral to protect the loan.

There are 2 primary types of margin requirements: initial and maintenance.

To answer the above question, the reader should first review Florida Statute 48.193, which is titled “Acts subjecting persons to jurisdiction of the Courts of this state.”  The elements required for pleading a civil conspiracy in Florida are (1) a conspiracy between two or more parties, (2) to do an unlawful act or to do a lawful act by unlawful means, (3) the doing of some overt act in furtherance of the conspiracy, and (4) damage to the plaintiff as a result of the acts, performed in furtherance of the conspiracy. Under Florida law, civil conspiracy is a derivative of the underlying claims which form the basis of the conspiracy. The gist of a civil conspiracy is not the conspiracy itself but the civil wrong which is done through the conspiracy which results in injury to the Plaintiff. There is no independent action for civil conspiracy. Thus, generally an actionable conspiracy requires an actionable underlying tort or wrong. An act which does not constitute a basis for a cause of action against one person cannot be made the basis for a civil action for conspiracy. However, there is an exception to the rule where the plaintiff can show some peculiar power of coercion posses by the conspirators by virtue of their combination, which power an individual would not possess.

For purposes of this discussion, we will assume that the elements set forth above to allege a civil conspiracy exist.  A series of Florida cases have found personal jurisdiction over non-resident defendants engaged in conspiracies that include tortious or statutorily-prohibited actions as against Florida residents.  For example, telephonic, electronic or written communications into Florida, by a non-resident, may form the basis for personal jurisdiction if the alleged cause of action arises from the communications.  In addressing allegations that a non-resident defendant committed a tort in Florida though acts and communications directed into the state from outside of Florida, the appropriate inquiry is whether the tort as alleged occurred in Florida and not whether the alleged tort actually occurred.

As can be seen from the above discussion, it is important to examine all of the facts underlying the cause of action alleged as to each defendant.  When dealing with a non-resident defendant, it is especially important to allege, in the complaint, all of the specific acts, of the non-resident defendant, that were committed in furtherance of the conspiracy so that the court may properly determine the issue of jurisdiction.

The elements required for pleading a civil conspiracy in Florida are (1) a conspiracy between two or more parties, (2) to do an unlawful act or to do a lawful act by unlawful means, (3) the doing of some overt act in furtherance of the conspiracy, and (4) damage to the plaintiff as a result of the acts, performed in furtherance of the conspiracy.  Under Florida law, civil conspiracy is a derivative of the underlying claims which form the basis of the conspiracy.  The gist of a civil conspiracy is not the conspiracy itself but the civil wrong which is done through the conspiracy which results in injury to the Plaintiff.  There is no independent action for civil conspiracy.  Thus, generally an actionable conspiracy requires an actionable underlying tort or wrong.  An act which does not constitute a basis for a cause of action against one person cannot be made the basis for a civil action for conspiracy.  However, there is an exception to the rule where the plaintiff can show some peculiar power of coercion posses by the conspirators by virtue of their combination, which power an individual would not possess.

Please keep in mind that the above information is being provided for educational purposes only.  It is not intended to be complete in all material respects.  If you have any questions concerning the contents of the post, you should contact qualified counsel.

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How Are Microcap Stocks Different From Other Stocks?

Lack of public information.  Often, the biggest difference between a microcap stock and other stocks is the amount of reliable publicly-available information about the company. Most large public companies file reports with the SEC that any investor can get for free from the SEC’s website. Professional stock analysts regularly research and write about larger public companies, and it is easy to find their stock prices on the Internet or in newspapers and other publications.  In contrast, the same information about microcap companies can be extremely difficult to find, making them more vulnerable to investment fraud schemes and making it less likely that quoted prices will be based on full and accurate information about the company.

No minimum listing standards.  Companies that list their stocks on exchanges must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders. In contrast, companies quoted on the OTC Bulletin Board (OTCBB), OTC Link LLC (OTC Link) or Global OTC generally do not have to meet any minimum listing standards, but are typically subject to some initial and ongoing requirements. You can find the OTCBB’s eligibility requirements for stocks at http://www.finra.org/industry/faq-otcbb-frequently-asked-questions  and you can find additional information about OTC Link and Global OTC at www.otcmarkets.com  and www.globalotc.com , respectively.

FAQ – Where Do Microcap Stocks Trade?

Many microcap stocks trade in the “over-the-counter” (OTC) market. Quotes for microcap stocks may be available directly from a broker-dealer or on OTC systems such as the OTC Bulletin Board (OTCBB), OTC Link LLC (OTC Link), or Global OTC.

OTC Bulletin Board is an electronic inter-dealer quotation system that displays quotes, last-sale prices, and volume information for many OTC equity securities that are not listed on a national securities exchange. The OTCBB is operated by the Financial Industry Regulatory Authority, Inc. (FINRA). You can read more about the OTCBB marketplace at http://www.finra.org/industry/faq-otcbb-frequently-asked-questions .

What Is a Microcap Stock?

The term “microcap stock” (sometimes referred to as “penny stock”) applies to companies with low or micro market capitalizations. Companies with a market capitalization of less than $250 or $300 million are often called “microcap stocks” – although many have market capitalizations of far less than those amounts. The smallest public companies, with market capitalizations of less than $50 million, are sometimes referred to as “nanocap stocks.”

Please be advised that this information is being provided for educational purposes only.  It is not designed to be complete in all material respects.  If you have any questions about this post or have been adversely affected by investing in a microcap or nanocap stock, you should contact a qualified professional.

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