r/stocks - r/Stocks - Rule update: No penny stock or OTC discussions

For a long time we've had rule 7 to prevent users from losing money in pump & dumps:

Rule 7: No pump & dump ticker discussions. We don't have a rule against microcap stocks, but they're susceptible to pump & dumps and those posts will be removed as spam/promotion and possibly autoremoved. Consider r/pennystocks, r/weedstocks, or r/CanadianInvestor

But the problem with this is that a pump can take days to weeks, so by the time we act it's already too late and a lot of users will fall victim to the dump or think they're clever and short only to time it wrong or realize the bid/ask spread is extremely wide and they're immediately at a loss when they get in.

So we have updated the rule to no penny stock discussions at all:

Rule 7: No penny stock discussions, including OTC, microcaps, pump & dumps, low vol pumps, etc. Consider r/pennystocks, r/weedstocks, or r/CanadianInvestor instead.

We're actually falling in line with subs that have banned penny stocks since forever like r/wallstreetbets:

No non-reporting penny, microcap, OTC stocks, low volume options, cryptocurrency, or any other worthless securities that are susceptible to scams or pump & dump schemes.

And r/stockmarket:

No penny stock/OTC/low volume pumps, yes, we can spot them easily

While r/investing doesn't directly reference penny stocks in their rules, they remove penny stock discussions through their moderation bots & automod.

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Our criteria for what a penny stock will be similar to Investopedia's definition:

Typically trades under $5 or previously traded under $5 before the pump

Below 300 million market cap or previously traded under 300m before the pump

Typically trades on OTC markets

Usually has missed reporting/filings; no auditing or odd auditing issues

Can have low volume or wide bid/ask spread

So while a stock might be over $5 or over 300m marketcap, but it was previously below those levels, we're going to consider those a penny stock and remove those posts to prevent users from engaging in a pump & dump.

I know a lot of users will be happy about this and at the same time angry/upset over it. But this is for your protection and raising the standards of the sub so we don't see shit stocks on the front page on a daily basis. Also a lot of users behind the scences have struggled to tell us and report on penny stock discussions when they weren't pump & dumps, such as using the report button, so now those posts/comments reported on will be removed since they fall under the new rule of no penny stock discussions.

If you see someone discussing a penny stock that fits the criteria above, please use the report button. Thank you.

Feel free to leave your feedback below, but please do not bring up penny stocks as an example or circumvent automod to do that. We're not going to ban users unless they're purposely promoting penny stocks or circumventing automod.

Another mod explained the purpose of this a little better than I did:

The purpose of the rule is mainly to prevent automated bots (or users) from using our community to manipulate a stock for profit.

We hope this makes the rule easier to interpret and follow so we can prevent our community from being used for market manipulation while still allowing discussion of legitimate companies.

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