In general terms, fraud such as investment or securities can occur when a broker makes false statements regarding a company or the value of the related stock. The victims typically will make financial decisions based on such false information.
Fraud can be at times difficult to grasp, for consumers who do not understand securities regulation. We have listed below a few examples of fraud and what you should be looking for when considering financial investments.
Securities Fraud by a Company
The fist type of fraud is when the officer or director of a corporation doesn’t accurately report company financials to its shareholders. Obviously, such actions can artificially increase the perceived worth of the company, and in-turn can encourage investors to invest based on false representations. I am sure we all can remember the Enron scandal. This was a clear example of securities fraud, in which corporate officers failed to report the company’s expenses. In-turn profits to appeared larger than actual results.
Insider trading is another type of securities fraud. In this case, an individual with confidential information about a company’s finances, uses such to make decisions about whether to buy or sell stock before the information is public. For example, an accountant for a corporation can notice their company is quickly losing money. They feel the company may be headed towards bankruptcy, and in-turn they sell their stock without following the proper rules and procedures, which includes notifying the board.
Third Party Misrepresentation
The last type of securities fraud, that we will discuss, occurs when a third party presents false information regarding the stock or value of a company. Often these fraudulent investment schemes work, when somebody artificially “pumps” up the stock price to encourage others to buy, only to later dump the stock for profit.
If you feel that you have been a victim of securities fraud, call our Michigan fraud attorneys today for a FREE case evaluation at 313-334-7767. We service all of Wayne and Oakland Counties, near Detroit to Birmingham MI and beyond!