The firm's vice chairman, Kye Hellmers, said Friday that the brokerage is attempting to raise additional capital so it can begin actively making markets again. In the meantime, without the firm's support as a market maker, many of the small stocks in which it was the primary dealer continued to fall in price on Friday.
Diedrich Coffee, for example, fell 44 cents Friday to $3.56 on Nasdaq. It started the week at $7.38. Craig plunged 50 cents Friday to $1.38. It started the week at $2.50.
Boston Group's problems point up one big risk investors in low-priced stocks should understand: Whenever you're dealing with thinly traded issues that are heavily dependent on one brokerage for market-making support, you should ask what might happen to the stocks' prices if that brokerage were forced to pull back.
The fact that the SIPC is there to protect you against the ultimate disaster--a firm's failure--is nice to know, but the SIPC can't help you with market-related losses that lead up to or follow that kind of disaster.
