What are common examples of securities frauds?

What are common examples of securities frauds?

On Behalf of | Dec 22, 2020 | Firm News |

In Florida, the law treats fraud crimes in a harsh way. If you face charges for securities frauds, you also face the possibility of a hefty penalty if convicted. 

Securities frauds come in many different forms. Each potential version might have different related charges, too. Thus, it is important to understand the most common examples of securities frauds. 

Insider trading

The Federal Bureau of Investigation has information on securities fraud to help spread awareness. One major example is insider trading. This happens when someone has confidential information about a company’s finances. They use this knowledge to make stock market decisions before the information gets to the public. For example, an employee may have information that a company is about to go bankrupt. They use this information to sell their stocks before the company goes under. 

Securities fraud

A company itself may commit securities frauds, too. This happens when the director or officer of a company does not accurately report its financial information to shareholders. This way, they raise the worth of their stock artificially. This encourages investors to buy shares, even though the company itself may actually have low financial health. People who buy shares with this false information lose everything if the company goes bankrupt. 

Third party misinterpretations

Finally, there are third party misinterpretations. This happens when third parties give out false information about an industry or company. They buy large amounts of stock in an unknown, cheap company. They then spread false information about the company to trick others into purchasing their shares, which drives up the profit. After reaching a certain level, they sell their own shares at a profit.