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Stock Fraud

STOCK FRAUD COMMONLY KNOWN AS SECURITIES FRAUD OR INVESTMENT FRAUD RISKY INVESTMENT OFFERS Stock Fraud often includes offers of risky investments to less sawy investors who are VIOLSATION unable to fully evaluate risk and who cannot afford the loss of capital. OF SECURITY LAWS DECEPTIVE PRACTICES Stock fraud is violation of securities laws Stock Fraud is a deceptive practice in the stock or which are in place commodities markets that cause investors to make to protect investors investment decisions based on false information, and markets. frequently resulting in losses. $10-$40 BILLION Securities regulators estimate that investment fraud in the United States ranges from $10-$40 billion annually. $1-$3 BILLION Trading volume in the United States has Securities regulators estimate $1–$3 Billion is directly from microcap grown dramatically since the 1990s, leading to stock fraud. an increase in fraud and securities misconduct. More complex investment vehicles and international markets means more opportunity for fraud. Recovery of assets taken by fraud is very difficult and expensive; Fraudulent schemes can have The Internet has given investors are usually lucky a devastating impact on criminals greater to recover any of their investors and the broader market, access to unsuspecting lost capital. plunging investor confidence. investors. TYPES OF STOCK FRAUD 01 02 03 04 05 06 07 CORPORATE DUMMY INTERNET INSIDER MICRO BOILER PONZI MISCONDUCT CORPORATIONS FRAUD TRADING CAP ROOMS SCHEMES 01. CORPORATE MISCONDUCT CORRUPT MANAGEMENT Fraud commited by high-level corporate officials. Example: Enron Became a major issue in the early 2000's PREVELANT IN EARLY 20O00's 02. DUMMY CORPORATIONS Dummy corporations are created to give the illusion of being a known, existing Fraudsters sell securities Coca Cla Clo Cca corporation with a similar from the dummy corporation, name. misleading investorsto think they are buying into the real corporation. 03. INTERNET FRAUD INCLUDES "PUMP & DUMP" SCHEMES. Fraudulent information is provided in chat rooms, forums, internet boards and spam email. %24 This causes a dramatic price increase in thinly traded stocks NEWS or stocks of shell companies. When the price reaches a certain level, criminals immediately sell off their holdings of those stocks. CERTIFICATE STOCK Buyers of the stock who are unaware of the fraud become victims once the price falls. 04. INSIDER TRADING THERE ARE TWO TYPES OF INSIDER TRADING. TYPE 1: Trading a company's stock by corporate insiders such as officers, key employees, TOP SECRET directors, large stake holders. THIS IS GENERALLY LEGAL, but there are certain reporting requirements. TYPE 2: Trading of a security based on critical secret information obtained because of the insider's connection to the corporation. THIS TYPE OF TRADING IS ILLEGAL in most instances. 05. MICROCAP FRAUD $250 MILLION $1-3 BILLION Microcap companies often Stocks of small companies of Estimated to cost investors have low liquidity, causing under $250 million market $1-3 billion annually. investors to have difficulty capitalization are deceptively selling their stock after the buying pressure has abated, promoted, then sold to an and the manipulators have fled. unaware public. INCLUDES: Pump and dump $5 A SHARE Fraudsters purchase large schemes Many microcap stocks involved in frauds are thinly traded penny quantities of stock, then artificially inflate the share Boiler rooms price through misleading stocks that trade for less than Internet scams information. $5 a share. 06. BOILER ROOMS Boiler rooms are stock brokerages that put Buy pressure on clients to make phone purchases of securities. Now Often pursue microcap fraud schemes. Buy Offer clients transactions fraudulently with an !!!! undisclosed profitable result for the brokerage. Many are not licensed or may be 'tied agents' of a brokerage house whichmay or may not be licensed 07. PONZI SCHEMES $64.8 BILLION INVESTMENT FUND WHERE WITHDRAWALS ARE FINANCED BY NEW INVESTORS INSTEAD OF PROFIT OBTAINED THROUGH Bernie Madoff caused INVESTMENT ACTIVITIES. $64.8 billion in losses. STAYING VIGILANT CHECKLIST If it sounds too good to be true, it probably is. Investors can protect themselves by checking up on their broker. Always get background info before investing with anyone claiming to be an investment professional. Review financial statements and perform research on any company before purchasing stock. Never trust strangers on the internet or through email. Use the SEC's resources for protecting investors. TIM TIMOTHYSYKES.COM Sources: TODAY S.066 %24

Stock Fraud

shared by bellaashlyn18 on May 23
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Do you know about stock fraud or securities fraud? With advancements in the way that we invest and ever more complex investment vehicles available to us, there is greater risk than ever for fraudsters...


Esha Goyal


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