Types of Securities Fraud
Understanding the different types of securities fraud can help you in detecting it. Securities fraud occurs when someone makes a false statement about a company or the value of its stock, and others makes financial decisions based on the false information. Talking to one of the attorneys at Robinson, Seiler & Anderson in Utah County can inform you on what to do when you encounter securities fraud. Listed below are some of the types of securities fraud you should be on the lookout for.
Fraud by the Company
The first type of securities fraud occurs when an officer or director of a corporation doesn’t accurately report the company's financial information to its shareholders. This can raise the worth of the company’s stock and encourage investors to buy shares of an unhealthy company. If the company goes bankrupt the people who bought shares based on false information lose their investment completely.
False Information from a Third Party
When a third party gives out false information about the stock market or a particular company or industry is a common type of securities fraud. Also known as “pump and dump” in this scheme, a person will find a small, unknown company with cheap stock and buy large amounts of its shares. The perpetrator will then send out false information about the company to encourage others to buy the stock, driving up the price. Once the price of the stock is high enough, the perpetrator sells his or her shares for a profit.
Insider trading occurs when someone with confidential information about a company's financial state uses that information to make decisions about whether to buy or sell the stock before that information is disclosed to the public. Buying or selling stock before disclosing information to the board is known as insider trading.
Securities fraud can be easy to avoid and detect with the help of one of the experienced attorneys at Robinson, Seiler & Anderson in Utah County. For more information about our firm and how we can help you in your business give us a call today.