Many people may use their investments to help provide for their family’s future. When stockbrokers are not honest, people may experience financial losses. It is important for people to recognize different types of securities fraud so they can protect themselves and their investments.
According to FindLaw, securities fraud occurs when people manipulate the market by providing false information that others use to make their investment decisions. Individuals might commit this type of fraud when they use secret information to choose which stocks they sell and purchase. This practice is known as insider trading. Additionally, a company can commit securities fraud if the head of the company communicates false information about the stock. This false information can make investors think they are purchasing a valuable stock when the company is actually on the verge of bankruptcy.
Some types of securities fraud may be more familiar to people. The Federal Bureau of Investigation says that a Ponzi scheme is a kind of securities fraud. This type of fraud guarantees high returns for investors but takes money from them because theirs is the only money involved. Additionally, some companies or individuals may offer investment opportunities that seem to guarantee extraordinary returns at little risk to the investor. Another type of securities fraud requires investors to pay money to help cover the fees associated with the investment. In this scenario, those promoting the scheme are not usually making any investment for the clients.
Many people may prefer to work with stockbrokers to take advantage of their expert knowledge of the market. However, there are still ways people can protect themselves from securities fraud. It is a good idea for people to do research so they know whether an investment will be a good one. Additionally, people may want to look up different investment companies so they can see if other clients have lodged complaints.