Securities fraud, which is as well known as investment fraud, is serious types of a white collar crime which can be committed in various forms but it mainly entail misrepresenting information that investors normally use to make decisions. The person behind the fraud may be an individual, for instance a stockbroker, Or an organization, like a brokerage firm, a corporation, or an investment bank. Self-governing individuals can as well commit this fraud using schemes like insider trading.
But first you need to know what securities actually are and how they work. We found this great video by One Minute Econ. that explains them quite well:
Understanding Securities Fraud
Now that you know what securities are and how they work we can delve a bit deeper into the topic of securities fraud.
The FBI (Federal Bureau of Investigation) explains securities fraud as a criminal activity which can comprise the high yield investment fraud, pyramid schemes, broker embezzlement, advanced fee schemes, foreign currency fraud, hedge fund associated fraud, Ponzi schemes, as well as the late-day trading. In the majority of the cases, this fraudster seeks to trick the investors through misrepresenting information and manipulating the financial markets in various ways. The crime includes giving fake information, offering bad advice, withholding key information, along with acting on or offering inside information.
Types of Securities Fraud
There are various forms of security frauds. In actual fact, there are lots of methods used by fraudsters to trick business people with false information. High-yield investment fraud, for instance, they may perhaps come with guarantees of high return when at the same time claim that there is just a little or no risk. The forms of investments may be in securities commodities, real estate or other categories. Advance payment schemes can also follow a more restrained strategy. The fraudster may convince their prospectus to pay them little amounts of money and they are promised greater and high returns. In most cases the money they request is to cover their processing fees and taxes for the monies they are waiting to be disbursed.
Pyramid and Ponzi schemes are usually drawn upon the funds furnished by the investors to pay for the returns that they are promised before investors are held up in the arrangement. Such schemes call for the fraudsters to constantly engage more and more people in order to swindle them for as long as possible. The other new type of security fraud is internet fraud which is also known as pump-and-dump. The different types of frauds have been mastered and this people are conning many. People use forums such as chat rooms to give false and fraudulent information concerning the stocks. In doing so, they force a price increment in the stocks. The pump to get a certain price then sells them after dump.
Example of Securities Fraud
Securities fraud includes an extensive range of unlawful activities. Some of the most common securities fraud types include committing accounting fraud, manipulating stock prices, and lying on SEC filings among others. For more information on securities fraud, please refer to this website that goes in-depth and answers the most common 10 Questions about Securities Fraud. It’s worth a read, so we advice you go check it out.