Securities Fraud

Securities fraud is a catch-all term referring to an illegal and deceptive course of conduct which is designed to manipulate the trading in a security to the benefit of the fraudster. The conduct is also called stock fraud or investment fraud, and is also used to describe conduct to lure investors into the purchase or sale of a security based on false or misleading information.

Regardless of the term, the underlying conduct is a violation of various securities laws, and includes insider trading, market manipulation, churning, unsuitability, excessive markups and many type of Ponzi schemes.

Various government entities are responsible for overseeing the stock markets and the conduct of stock brokers to detect and present securities fraud, including the United States Securities and Exchange Commission, the Commodity Futures Trading Commission and various state securities commissioners. The Financial Industry Regulatory Association is a self-regulatory organization which is charged with the primary responsibility for regulating stock brokers and brokerage firms, under the supervision of the SEC.

Private citizens can sue individuals who they believe have committed securities fraud by hiring their own securities lawyer to represent them in court, or in a securities arbitration, typically conducted before a panel of independent arbitrators under the direction of FINRA

Other Definitions

Investopedia: A securities fraud is a type of serious white-collar crime in which a person or company, such as a stockbroker, brokerage firm, corporation or investment bank, misrepresents information…

Wikipedia: Securities fraud can also include outright theft from investors (embezzlement by stockbrokers), stock manipulation, misstatements on a public company’s financial reports, and lying to corporate auditors. The term encompasses a wide range of other actions, including insider trading, front running and other illegal acts on the trading floor

 

 

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