If You Conduct Business In The Securities Industry You Need To Understand Securities Fraud Rules

There are many different terminologies for securities fraud

. One of the other terms used is investment fraud. It is important that one be aware of practices that could be considered fraudulent each if you are engaged in business in this industry or if you plan to conduct business in the industry.

Individuals that work in this industry share a lot of information among themselves and with the public. It is generally expected that this information be shared and disseminated in an honest as well as a truthful way. When people in the industry do not do this and intentionally provide information that is untruthful this can be considered securities fraud.

A lot of transactions in the industry are based on this information that is shared amongst its participants. When the wrong information is provided there can be heavy losses. There are laws in the industry that exist specifically to deter such fraudulent action.

There are plenty of ways that this behavior can be manifested. One such manifestation would be outright theft by a company from its investors. Fraudulent companies have figured out many ways that this can be done including the manipulation of the stock owned by a company's investors with the goal of deceiving them. Another way this can be done would be when companies provide incorrect information on their financial reporting statements. These are just a couple of the ways that a company can engage in securities fraud.

This fraudulent action also has several different types. When it is engaged in by corporations it can exist in a large-scale. There are many companies that have been prosecuted because of this type of activity.

Sometimes companies will intentionally create a fake corporation in order to lead consumers into believing that this company is real and has legitimate stock. These companies are known in the industry as dummy corporations. Investors must be watchful of such creations as they could sometimes appear quite legitimate.

Another way in which this fraudulent activity could be conducted is through the internet. In such cases companies or individuals will publish information that is not correct. This is done with the intention of developing interest in a specific stock. A result of this interest is usually at the despite in the price of the stock. Fraudsters will then take advantage of this peak and sell their stock in order to make a profit.

There are plenty of methods that can be used in disseminating this information. One such method could be the publication of information for public consumption. Such publications will usually have no indication that the information being published is biased towards its publisher.

Yet another example of this fraudulent behavior is insider trading. This occurs when employees of the company traded on an exchange utilize inside information to benefit themselves. Such trading becomes illegal specifically when the information being traded is not available to the general public and has been obtained specifically as a result of the employee's relationship with the company. Ensuring that you have an understanding of your company's regulations regarding insider trading is important to avoid the penalties associated with this kind of behavior.

by: Tracy Narvaez

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