Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws.
In general, securities fraud include misleading practices in the stock and service markets, and arise when investors are enticed to invest their money in ventures which are based completely on false reports. Securities fraud involves absolute stealing from investors and misleading statements on a public company’s financial documents. The term also has a wide range of various actions such as Insider trading, front running and other illegal activities on the business ground of a stock or commodity exchange.
As per the FBI, securities fraud involves false testimony on a company’s financial statement and Securities and Exchange Commission (SEC) filings; being untruthful to corporate auditors; insider trading; stock manipulation schemes and embezzlement by stockbrokers.
Some of the most common securities fraud which takes place every now and then in the current markets is: Dummy corporations, Internet fraud, Insider trading and Ponzi Schemes.
Dummy corporations are formed by fraudsters to create a false impression of being an existing corporation with name similar to theirs. Then the fraudsters sell the securities in the dummy corporation by deceiving the investor into thinking that they own shares in the real corporation.
According to the SEC, Internet fraud resides in several forms:
• Online investment newsletters that offer seemingly unbiased information free of charge about featured companies or recommending "stock picks of the month." They are sometimes used for fraud.
• Bulletin boards that often contain fraudulent messages by hucksters.
• E-Mail spams from perpetrators of fraud.
Insider trading is the trading of a corporation's stock or other...