What is securities fraud?

Many of us have heard the term “securities fraud,” but you may wonder what it refers to. Accusations of securities fraud can result in serious potential penalties and consequences, which is why it is important to understand what securities fraud is.

Securities fraud generally refers to circumstances when a false statement is made about a company or the value of stock and a financial decision is made based on that false information. One instance of securities fraud can occur when a director of a company does not correctly report financial information to shareholders. Another example of securities fraud is insider trading. Insider trading occurs when a party with confidential information about the financial status of a company discloses that information before it is made public and that information is used to make financial decisions.

Another type of securities fraud includes third-party misrepresentation. This occurs, for example, when false information is provided to drive the price of a stock artificially high so that the party providing the misleading information can sell their stock for a profit. Securities fraud is a type of white collar crime that can have a significant impact on both those harmed by it and those accused of perpetrating securities fraud.

Securities fraud allegations can be complex, so it is helpful to understand or have trained guidance to help keep assets safe, but also to respond to any accusations of securities fraud if they come up. The better informed the parties are, the better position they are to protect themselves concerning securities fraud using the legal options available to them.