Securities Fraud: Recognizing Red Flags And Protecting Investors

In the present time of investing, where fortunes can be made and lost in the blink of an eye, there lurks a threat that can undermine even the most careful strategies that are insider trading or securities fraud. Unscrupulous activities such as insecure holding and the entire market scope are very dangerous to investors around the world. While one another hand, education and awareness serve as safeguards, the risk of losing their investments in a scam cannot be completely ruled out.

Understanding Securities Fraud

The fraud with securities belongs to the field of white-collar crimes, as it does not have a single definition, and includes all the schemes that are devised to mislead investors for financial benefit. Some common forms of securities fraud include:

1. Insider Trading: In case of individuals having statutory access to and knowledge of insider information disregard the stock value fluctuations for trading, thereby, profiting from the unprivileged.

2. Pump and Dump Schemes: Imposters create false or misleading statements that boost up the price of a stock and then abandon their shares at the inflated price to the prejudice of inexperienced investors.

3. Accounting Fraud: Firms play tricks with their financial statements in order to fool the buyers of stocks of the company with the performance of their business.

4. Pyramid Schemes: In the pyramid scheme, income is generated through investment and trading often earn returns only for recruiting others, rather than any legitimate operations.