A Canadian Penny Stocks blog reader had a good question that might be of interest to other readers so I thought it would be a good chance to share it through a post. The question is simple: Can you buy penny stocks within a TFSA (Tax-Free Saving Account)?

The short answer is Yes! That’s the easy answer however, the reader’s question went further because his online broker said that penny stocks weren’t registered and he wouldn’t be able to buy penny stocks with a TFSA. This is where some explanation is required to understand the differences between penny stocks, because they’re not all created equal.

Canadian penny stocks trade on either the Toronto Stock Exchange or the Venture Exchange, with the vast majority residing on the Venture Exchange. In order to be listed on the venture exchange a company must meet certain filing requirements in order to stay in good standing. Being listed on “the big board” (TSX), companies have heightened filing requirements and must meet other price related requirements as well.

But in either case you should be able to buy and sell any and all stocks on either of these exchanges using a TFSA. I can speak to this as I’ve done so using a TFSA at Questrade.

What the reader’s broker is referring to when they say the stocks aren’t registered are likely Pink Sheet stocks. Pink sheets and OTC (over-the-counter) stocks are companies trading in the United States but aren’t listed on the major exchanges. They are traded over the counter and don’t have the filing requirements that stocks listed on an exchange have.

There are a lot more scams in this area and you really need to watch yourself here. There are ways to make good money in this way however it is the high risk of high risk investing. This part is true, you can’t trade these types on stocks in a registered account.

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