PENNY STOCK Definition

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PENNY STOCKS are those securities that are not listed on a national securities exchange and are priced under $5. There are exclusions for securities of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years or greater than $5 million if in operation less than three years. Securities of issuers with average revenue of at least $6 million for the last three years are also not considered penny stocks. For a complete definition of a Penny Stock, see SEC Rule 3a51-1. OTCBB securities are considered penny stocks unless they qualify for one of the exclusions.

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MORTGAGE-BACKED SECURITY is a security that returns principal and interest monthly as payments are received on the underlying mortgages. Mortgage-backed securities are made up of individual home mortgages guaranteed by the government and its agencies. The mortgages are packaged into pools by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corp. (FHLMC) or a nongovernment-affiliated entity. Unscheduled repayment of principal can shorten the maturity of the bonds.

FRANCHISE is a legal arrangement giving rights to sell a product or service.

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