Speaking of money, there is a strong association between financial activities and crimes. Among them, there is a serious and highly damaging one named securities fraud.
Securities fraud, known as stock fraud and investment fraud, belongs to the white-collar crimes. US Law and Legal Definition describes it as 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.
Furthermore, the perpetrator ranges from an individual to groups or organizations. For instance, an individual perpetrator can be a stockbroker, while, as an organization, it can be a brokerage firm.
The crime target varies, but it chiefly aims at investors. To be more specific, the perpetrators most likely target inexperienced investors that are assumed to possess restricted information about the markets.
Numerous notorious cases of securities fraud happen in investment world and among them was the WorldCom scandal. Accordingly, the company manipulated its financial data, affecting the income statement, balance sheet, Form 10-K filing, and its annual report.
Also Read: Insider Trading: A Form of Illegal Trading
The Danger of Securities Fraud
Oftentimes, the potential danger of securities fraud is not apparent. In most cases, the deceptive practices were late to detect.
Accordingly, what makes this fraud horrendous is the manipulation of information. It, in addition, does not directly scam or rob the funds of the target victims.
In other words, information influences a pivotal role in this crime. Additionally, clever uses of information lead to a longer and more vast income, simply because they sound convincing, making the victims oblivious.
To simplify the flow of the crime, the perpetrator publishes false information frequently, leading investors to make decisions based on it. Another form of the crime might revolve around data and market manipulation, misrepresentation, and withholding key information.
Also Read: Sources of Forex Scam and How to Avoid Them
