Not exactly. Insitutions usually have their own rules against buying sub $5 stocks (for example, a mutual fund might have portfolio restrictions against it), usually based on risk managment. Effectively it's the same thing as what you state but just to be clear, there is no law or regulatory prohibition on insitutions buying stocks below $5.

Goldman can buy PTSC shares if they want. They won't, of course, but it's not something they are prohibited from doing.

Usually you'll find only smaller funds and smaller capital management groups buying pennies.