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With Scottrade why can't you use Restricted funds to buy stock less than $3?
It's not a problem, I'm just curious why this rule exists. To quote the site "Restricted Funds represent recent Money Direct deposits and uncleared check deposits. These funds cannot be used to purchase stocks under $3"
Why the $3 limit? What issue could arise with a cheaper stock that wouldn't arise with a more expensive one?
3 Answers
- Rigal TLv 67 years agoFavorite Answer
Risk, low priced stocks are at a greater risk of filing bankruptcy any day. This isn't a federal restriction like the 25k rule. Scottrade just doesn't want to take the risk.
- rarguileLv 67 years ago
I assume that Scottrade is concerned that a thinly-traded OTC BB penny stock could be subject to a "pump and dump" operation. A $1 stock that suddenly trades for $2 when the market opens as a result of "rumors" and then closes at $0.50 after a few million shares have changed hands.
- Anonymous5 years ago
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There are three things you'll want to look for when picking a penny stock to make sure that you don't get penny stuck: Underlying business, financials, and footnotes.
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