Securities fraud
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For a discussion of the legal actions for securities fraud in the United States under the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, see the Wiki entry for the Private Securities Litigation Reform Act.
Civil securities fraud, also known as investment fraud, is a practice where investors are deceived and manipulated, resulting in theft.[1]
This is a form of white collar crime which has been increasing on the rise as the Internet and the World Wide Web have brought white collar criminals and their victims closer together, resulting in an upsurge in global economic crime. The trading volume in the United States securities and commodities markets has grown dramatically over the last decade. This growth has led to an increase in fraud and misconduct by investors, executives, shareholders, and other market participants. Securities regulators and other prominent groups have estimated that civil securities fraud totals approximately $40 billion per year. Fraudulent schemes perpetrated in the securities and commodities markets can ultimately have a devastating impact on the viability and operation of those these markets.
Securities fraud is becoming more complex as the industry develops more complicated investment vehicles in an effort to obtain higher rates of return. In addition, white collar criminals are expanding the scope of their fraud and are looking outside of the United States for new markets, new investors to defraud and banking secrecy havens to hide their unjust enrichment. The securities industry is one of the most critical and influential industries in the country and is regulated by the SEC.
A study conducted by the New York Stock Exchange in the mid-1990's revealed that approximately 51.4 million individuals owned some type of traded stock, and an additional 200 million individuals owned securities indirectly. These same financial markets provide the opportunity for wealth to be obtained and the opportunity for white collar criminals to take advantage of unwary investors.
Recovering assets from the proceeds of securities fraud is a resource intensive and expensive undertaking.
Potential victims of this crime are anyone who has invested money into the company; typically people aged 50 years or older are the most victimized by Securities Fraud. Potential perpetrators of Securities Fraud are any high ranking official within the company who might have access to the payroll or financial reports that can be manipulated.
Recent examples of securities fraud are the Enron and Worldcom scandals. Both companies are guilty of theft of investors and defrauding the federal government with fraudulent tax reports.
The elements of the crime are theft of capital from investors and defrauding the accounting companies about your financial reports.
