What is securities fraud?


Being the victim of securities fraud can be devastating on many levels. Securities fraud, and the harm it causes, can be extensive for victims and their families financially and emotionally. As a result, victims of securities fraud should be familiar with what securities fraud is and what can be done about it if they have been victimized.

Different types of securities fraud

Securities fraud can come in many forms and all can have serious consequences for victims. The different types of securities fraud include:

  • Securities fraud by the company: Securities fraud can be committed by the company when an officer or director of the company fails to accurately report the financial information of the company to its shareholders.
  • Insider trading: Insider trading is a type of securities fraud that can occur when an individual with confidential information about a company and its financial condition uses that information to make securities trades. The information is not known to the public and is used to buy or sell stocks prior to it being made known to the public. Insider trading can be committed by an employee of a company other individual with inside information that is acted upon.
  • Third-party misrepresentation: Third-party misrepresentation occurs when a third party provides false information about a stock or the financial health of a company that results in driving up the price of the stock so the individual who has mislead other investors can sell it for a profit.

There are a variety of different types of securities fraud, including Ponzi schemes as well, and ways that victims can be harmed by securities fraud. Fraud crimes typically involve the use of misrepresentation for financial gain. For that reason, victims should understand how to watch for potential securities fraud crimes so they can better protect themselves.