Consumer Securities Fraud

Any deceitful act made by an issuer or seller of stock where the aim is to create an intentional loss for the investor is considered consumer securities fraud. A corporation, brokerage firm, stock broker or investment bank can all be guilty of purposefully presenting misinformation in regards to a company's financial standings. Individuals independent of large corporations or brokerage houses can also commit securities fraud by participating in things like insider trading.

The United States Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NSAD) are the two agencies that investigate any allegations linked with fraudulent securities acts. This type of conduct can carry heavy civil and criminal charges that can result in multiple fines and even imprisonment.

Common types of consumer securities fraud include dummy corporations, boiler rooms and internet fraud. Criminals who create dummy corporations with names that closely resemble established well-known businesses. The crooks rely on consumers who assume that the fictitious company and the existing business are two in the same to buy non-existent stocks. A scam that uses a high-pressure telesales strategy is known as boiler room fraud. The "stock brokers" offer commodities and stocks that are non-existent, distressed or acquired through a middleman agency at an undisclosed markup.

Consumer securities fraud via the internet is done mainly through what is known as a "pump and dump" scheme. Crooks utilize free web software to distribute a seemingly free and unbiased investment newsletter with tips for investors. The persons behind the crime recommend a "stock of the month" to try and lure potential investors to plump an otherwise thin stock. Criminals also try to raise the stock price through posting false information on bulletin boards and email spamming as well. Once the targeted stock's price has risen high enough for the perpetrators to make a profit, they sell their shares and the stock plummets to its original price.

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