There seems to be a few of you on here all speaking about the same issue with the same company.
This is NOT the definition of 'Treating Customers Fairly' which the Regulator of the industry the Financial Services Authority is keen to impose upon its community.
Montague Pitman, just like every other financial institution has a duty of care to its clients and has to advise then accordingly. This means taking into account your investment objectives, your age, understanding, and attitude to risk, outgoings, income, and whether or not you are a Retail Customer or a Professional Customer. - Be careful with the latter - as this can mean that you don't have as many 'rights' as that you are afforded under the 'retail' classification of the FSA Rules and regulations.
Companies often 'sell' penny shares to Clients on the almost guaranteed promise that the company
Share price has 'potential' (note potential) to rise in the future. That is like saying we have the 'potential' to see another harsh winter this year and deep snow. In reality it depends on a variety of different factors. Not just the weather in the UK... And in the case of shares the same applies. The 'potential' we talk of here is like saying that the Small Cap Index has the Potential to rise in the future.... Yes, that is not rocket science, but it doesn't mean that it WILL, and neither does it mean that your own particular shares will rise either. There is a reason why these penny shares are just that 'penny shares' and not trading at ££££. The broker will often try to get you to make a decision there and then on the phone DO NOT DO IT! If it is worth it, it will be there the next day or the next week. If you were to be as gullible to believe everything you hear, you would believe in Fairy Tales.
Even if one did 'get away' so be it.... It is better to have taken time and 'due diligence' and got it right the first time than it is to be gullible and jump into an often illiquid stock in large amounts that you simply wont be able to sell at the same price again - never mind a profit.
Often the Brokers will use examples of the few company's that they have got correct - again don't be fooled. We can all pick a winner once in a while, but this is more down to market conditions and other factors such as luck as it is for everything else.
Remember that these brokers 'win' what ever you do...... They take a COMMISSION - not just out of YOUR transactions (both ways) but also on the fact that they have purchased a large chunk of these shares from the Market Maker at a discount to the current Purchase and Selling price, this is how they can convince you to buy the shares as they often tell you that they are getting the shares at a DISCOUNT to the actual MARKET PRICE at the moment. For example (say) the share price was:
4p-8p in the market at the moment, the Broker will convince you that this is a good bet as they can get the shares at (say) 3.5p!!
A huge (percentage wise) discount to that of the current BID price!!! In other words, you are almost guaranteed to make a profit..... What they don't tell you is that they are also getting a commission for selling (pushing) these shares on to you... The commission if you want to call it that is the 'mark up' of what the market maker has sold the shares to the stockbroker at.
So take our example above..... The shares are 4p - 8p in the market, and they Broker convinces you that he can 'sell' you the shares at 3.5p.....Sounds good doesn't it???
What's missing???
Well, what is missing is the fact that the broker has purchased often THOUSANDS of pounds worth of shares from the Market Maker at a DISCOUNTED price of (say) 3p per share.... Therefore, although you think you are making a profit - either way the broker IS making a profit, as he is pushing the shares on to you at a premium to that of which he purchased them from the Market Maker at.
Now, once this transaction is complete - this is where it gets interesting for you, as this is where the markets act against you.
Let’s say the Broker purchased 500,000 shares from the Market Maker and has successfully 'placed' these shares with you the client(s) over a period of say two to three weeks...
He now collects your money for the transaction, and then 'apportions' the shares to you all (that he has now received from the Market Maker) He 'pays' the Market Maker with the money that you have paid him for these shares... As the Market Maker knows that 500,000 shares have just been 'sold' at 3.5p he AUTOMATICALLY moves the price in the market DOWN to accommodate this fact. (Let’s face it there is no way the market maker is going to make an instant loss over night like that is there.)
So, what started off as 4p - 8p is now in the market automatically trading at 2.75p - 4p (or similar). The share price then continues its downward spiral as there have been no decent trading updates from the company, no operative events and nothing more has happened to change anybody’s view that it is nothing more than a highly speculative buy. And certainly NOT one with which Private Clients should be playing around with unless they are prepared to LOSE all of the money that they invest.
This fact is often over looked. Now try to double your risk and exposure to risk if you may by thinking about what the consequences could be if you were to start to trade in CFD's or similar... It just doesn't bear to think about does it.
Be very, very, very careful when dealing with Small Cap Shares or brokers or similar......
Remember that the Broker has a responsibility to you too. And remember that you CAN and SHOLD complain if you feel you have been treated unfairly.
The FSA recently published a note to all Small Cap Brokers warning them that they are under the microscope again. It wouldn't hurt you to look at this and take note. It also won’t be much consolation to know that even if the firms are fined for Rule Breaches of not only specific FSA Rules but also the overarching Principles of Business, there is nothing to stop the company simply setting itself up again under a different name - unless of course the FSA deem the Directors should be banned. Which in my opinion they should be, but without individual details of cases and circumstances, it is difficult to say.
Link:- FSA warns penny share customers
Have a look at the below and DO REMEMBER TO SPEAK UP!!! COMPLAIN AND COMPLAINN AGAIN IF NECCESSARY!!!
COMPLAIN – don’t JUST post on here GO TO THE FSA
Be specific
Remember as much as you can
DON’T LET IT DROP
Go to the Ombudsman…
Get your cause exposure
Stand outside the office if need be
Ask the staff when you see them go in to the
Remember that it is pressure selling
Ask yourself if it is too good to be true…. Then it probably is.....
Don't feel pressured into buying something there and then, and if you do feel pressured then that is what it is - nothing more nothing less. It is your feelings of pressure, therefore it is pressure selling which is NOT allowed. In a lot of cases, you shouldn't even be purchasing shares in Penny Stocks in the first place as you haven't been properly risk assessed etc.
Good luck , dont let it drop and do go to the FSA, Financial Ombudsman, do NOT let it drop, watch the time with regards to open compliants, and if need be contact the press etc.
This is NOT the definition of 'Treating Customers Fairly' which the Regulator of the industry the Financial Services Authority is keen to impose upon its community.
Montague Pitman, just like every other financial institution has a duty of care to its clients and has to advise then accordingly. This means taking into account your investment objectives, your age, understanding, and attitude to risk, outgoings, income, and whether or not you are a Retail Customer or a Professional Customer. - Be careful with the latter - as this can mean that you don't have as many 'rights' as that you are afforded under the 'retail' classification of the FSA Rules and regulations.
Companies often 'sell' penny shares to Clients on the almost guaranteed promise that the company
Share price has 'potential' (note potential) to rise in the future. That is like saying we have the 'potential' to see another harsh winter this year and deep snow. In reality it depends on a variety of different factors. Not just the weather in the UK... And in the case of shares the same applies. The 'potential' we talk of here is like saying that the Small Cap Index has the Potential to rise in the future.... Yes, that is not rocket science, but it doesn't mean that it WILL, and neither does it mean that your own particular shares will rise either. There is a reason why these penny shares are just that 'penny shares' and not trading at ££££. The broker will often try to get you to make a decision there and then on the phone DO NOT DO IT! If it is worth it, it will be there the next day or the next week. If you were to be as gullible to believe everything you hear, you would believe in Fairy Tales.
Even if one did 'get away' so be it.... It is better to have taken time and 'due diligence' and got it right the first time than it is to be gullible and jump into an often illiquid stock in large amounts that you simply wont be able to sell at the same price again - never mind a profit.
Often the Brokers will use examples of the few company's that they have got correct - again don't be fooled. We can all pick a winner once in a while, but this is more down to market conditions and other factors such as luck as it is for everything else.
Remember that these brokers 'win' what ever you do...... They take a COMMISSION - not just out of YOUR transactions (both ways) but also on the fact that they have purchased a large chunk of these shares from the Market Maker at a discount to the current Purchase and Selling price, this is how they can convince you to buy the shares as they often tell you that they are getting the shares at a DISCOUNT to the actual MARKET PRICE at the moment. For example (say) the share price was:
4p-8p in the market at the moment, the Broker will convince you that this is a good bet as they can get the shares at (say) 3.5p!!
A huge (percentage wise) discount to that of the current BID price!!! In other words, you are almost guaranteed to make a profit..... What they don't tell you is that they are also getting a commission for selling (pushing) these shares on to you... The commission if you want to call it that is the 'mark up' of what the market maker has sold the shares to the stockbroker at.
So take our example above..... The shares are 4p - 8p in the market, and they Broker convinces you that he can 'sell' you the shares at 3.5p.....Sounds good doesn't it???
What's missing???
Well, what is missing is the fact that the broker has purchased often THOUSANDS of pounds worth of shares from the Market Maker at a DISCOUNTED price of (say) 3p per share.... Therefore, although you think you are making a profit - either way the broker IS making a profit, as he is pushing the shares on to you at a premium to that of which he purchased them from the Market Maker at.
Now, once this transaction is complete - this is where it gets interesting for you, as this is where the markets act against you.
Let’s say the Broker purchased 500,000 shares from the Market Maker and has successfully 'placed' these shares with you the client(s) over a period of say two to three weeks...
He now collects your money for the transaction, and then 'apportions' the shares to you all (that he has now received from the Market Maker) He 'pays' the Market Maker with the money that you have paid him for these shares... As the Market Maker knows that 500,000 shares have just been 'sold' at 3.5p he AUTOMATICALLY moves the price in the market DOWN to accommodate this fact. (Let’s face it there is no way the market maker is going to make an instant loss over night like that is there.)
So, what started off as 4p - 8p is now in the market automatically trading at 2.75p - 4p (or similar). The share price then continues its downward spiral as there have been no decent trading updates from the company, no operative events and nothing more has happened to change anybody’s view that it is nothing more than a highly speculative buy. And certainly NOT one with which Private Clients should be playing around with unless they are prepared to LOSE all of the money that they invest.
This fact is often over looked. Now try to double your risk and exposure to risk if you may by thinking about what the consequences could be if you were to start to trade in CFD's or similar... It just doesn't bear to think about does it.
Be very, very, very careful when dealing with Small Cap Shares or brokers or similar......
Remember that the Broker has a responsibility to you too. And remember that you CAN and SHOLD complain if you feel you have been treated unfairly.
The FSA recently published a note to all Small Cap Brokers warning them that they are under the microscope again. It wouldn't hurt you to look at this and take note. It also won’t be much consolation to know that even if the firms are fined for Rule Breaches of not only specific FSA Rules but also the overarching Principles of Business, there is nothing to stop the company simply setting itself up again under a different name - unless of course the FSA deem the Directors should be banned. Which in my opinion they should be, but without individual details of cases and circumstances, it is difficult to say.
Link:- FSA warns penny share customers
Have a look at the below and DO REMEMBER TO SPEAK UP!!! COMPLAIN AND COMPLAINN AGAIN IF NECCESSARY!!!
COMPLAIN – don’t JUST post on here GO TO THE FSA
Be specific
Remember as much as you can
DON’T LET IT DROP
Go to the Ombudsman…
Get your cause exposure
Stand outside the office if need be
Ask the staff when you see them go in to the
Remember that it is pressure selling
Ask yourself if it is too good to be true…. Then it probably is.....
Don't feel pressured into buying something there and then, and if you do feel pressured then that is what it is - nothing more nothing less. It is your feelings of pressure, therefore it is pressure selling which is NOT allowed. In a lot of cases, you shouldn't even be purchasing shares in Penny Stocks in the first place as you haven't been properly risk assessed etc.
Good luck , dont let it drop and do go to the FSA, Financial Ombudsman, do NOT let it drop, watch the time with regards to open compliants, and if need be contact the press etc.
