Securities and Exchange Fraud

Fraud schemes are constantly evolving and becoming more complicated. While the SEC has brought down systems of fraudulent activity in the past, they need your help to keep up their effort. Many whistleblowers were employees of the fraudulent company before coming to realize that their superiors were engaging in unethical business practices to further the company’s profit margin. These were people who went to work every morning just like you have, but their actions have helped hold organizations accountable for stealing millions of dollars. To notice fraud, you have to understand it, so here are a few common SEC fraud schemes that have resulted in lawsuits:

The SEC mandates that companies and investment advisors provide accurate and honest information to any potential investor. If they fail to do so, it is considered fraud, and it’s only a matter of time until someone speaks up about their criminal behavior.

Companies can not disclose sensitive information to manipulate investors into purchasing stocks or investing. This is amongst the most common forms of SEC fraud, and it’s one of the SEC’s top fraud enforcement priorities moving forward.

There have been cases of CEOs, accountants, and other members of financial institutions who have embezzled millions of dollars from investors and other businesses. While these larger cases often make headlines, more minor instances of embezzlement can add up to significant amounts of stolen funds, as these individuals operate under the radar for years while pocketing their investors’ money.

Ponzi-schemes, or pyramid schemes, are FINRA arbitration violations where a fraudulent organization or individual finances earlier investors with the payments from new investors. One of the most noteworthy examples was Bernie Madoff’s scheme that was uncovered in 2008 and defrauded investors of a combined $64.8 billion.

Companies are prohibited from interfering with sensitive stock information, delaying the release of said information, or engaging in “pump and dump” schemes, which occurs when an organization convinces a large group of investors to purchase the stock of a company to drive up the price rapidly. Once the price is inflated, the organization behind the scheme sells off a large portion of its stock in the company to take the profits while their investors lose money. Any manipulation of market price securities is a serious crime, but together, we can hold these organizations accountable for their wrongdoing.

The SEC requires financial institutions and the employees within them to act responsibly with their client’s money. This fraud can take various forms, such as diversion of client funds into unauthorized transactions, charging exorbitant commission fees, and churning customer accounts, but the harm is all the same. No investor should have their money stolen by the organization they trusted to act responsibly with their investment, regardless of the profits they may make.

The SEC determines which companies can publicly trade their stock to investors. If an investment advisor or financial institution uses a client’s investment to purchase an unauthorized security, it’s considered fraud and they could be held liable for their actions.