The Problem

The problem with this type of broker is quite obvious. You will not know first hand where the stockbroker’s loyalty lies. Therefore, will he sell you a stock that is not doing well? Does he know a stock you own will be doing better in the future and therefore wants to sell it to you? Of coursewe can not say for sure that a stockbroker will do this or even that he will not. The bottom line is, though, if you are in the business of penny stock investing, you need to know who’s behind you.

Many penny stocks are traded in the way of principal stock brokers. Although this does not necessarily have to be a bad thing, it is important to know that it could potentially be there. There may be a conflict of interest in the way of the stock broker andyou should know about it before hand.