I understand that pink sheet stocks are a lot more risky than those on stock exchanges, but I was told that Nevada pink sheet stocks are the riskiest of them all. I was told that these companies can "go dark" and legally withhold financial information from their shareholders. Is this correct? Is Nevada alone in this, or are there other "bad" states where this can happen?

1 Answer 1


The relationship between corporations and their shareholders is, in most respects, governed by the laws of the state in which they are incorporated. Some states afford greater rights to the management of the corporations while others give more power and rights to the owners (shareholders). The differences between states in most respects is small as they tend to follow each other's lead, but there are differences. It's entirely possible that Nevada has weaker shareholder protections and disclosure requirements than some other states.

The SEC also governs some aspects of corporate governance and investor relations. Those aspects will be the same in every state, but the SEC doesn't micromanage every little thing.

EDIT: Note that, according to Wikipedia, Nevada has particularly strong protections for corporate executives (they are not easily sued for the actions of the firm) and weak disclosure requirements. They also have strong protections for executives against takeovers. Moreover, at this time only Nevada and Texas do NOT have information sharing agreements with the IRS. Perhaps this is what your source was concerned about. From what I'm reading, Nevada is particularly friendly to corporate executives and unfriendly to investors.


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