The Securities and Exchange Commission (SEC) oversees acts of securities fraud to protect investors. However, it is often criticized for being more reactive than proactive. For example, the SEC changed its regulations during the 2000s regarding corporate fraud, and the subsequent investigations began. The recession and sub-prime lending scandals provided new concerns about securities fraud, some of which were accurate, as in the case of Bernie Madoff.
Of course, part of the problem is the myriad forms of securities fraud can takewe're talking everything from insider trading to disclosing false or misleading statements to misappropriating corporate assets for personal enrichment. Unfortunately, this kind of deception is so rife that even though billions of dollars go lost because of securities fraud every year, it's often not until after a significant economic event (like the 2008 financial crisis) that regulators can pursue meaningful prosecutions.
The Dummy Corporations are dummy corporations, usually created for companies to represent a specific geographic location.
Using dummy corporate structures, fraudsters can fake the existence of an actual corporation and trick consumers into believing they are buying shares in an honest company.
Internet Fraud
Internet fraudsters often employ "pump-and-dump" schemes, in which they artificially inflate stock prices to drive-up their returns, only to sell off once they feel they can profit. They do this with false information that they pump into chat rooms, emails, and the like to increase the price of their shares. Once the price reaches a certain level, the fraudster dumps their shares and profits before the other investors realize what, and share prices return to normal.
Top Trading Tips
Insider trading is the trading of securities based on an intimate knowledge of a pending merger and made permissible by insider knowledge that the deal will be done.
There are many other forms of securities fraud, such as microcap fraud, boiler rooms, Ponzi schemes, and "short and distort" practices. As markets change, so too will the ways to commit securities fraud.
Securities Law
A negotiable instrument is an asset that can be traded freely for cash or another negotiable instrument. Included in its definition are stocks, bonds, and mutual funds. Since these assets can be easily exchanged, traders must be licensed to buy and sell these securities.
The Securities and Exchange Commission is the federal agency predominantly responsible for administering and enforcing federal securities laws. A violation by a corporation or individual of these Securities laws may expose them to administrative, civil, or criminal punishment. A breach by a corporation or individual which has caused substantial financial loss to many people may bring a civil lawsuit for restitution on behalf of that person(s).
Headquartered in Washington, D.C., the Federal Communications Commission (FCC) is an Executive Branch agency responsible for regulating interstate and international communications by radio, television, wire, satellite, and cable. Before April 1996, the FCC was called the Federal Radio Commission (FRC).
Five Commissioners appointed by the president lead the FCC, and each Commissioner serves a five-year term. No more than three Commissioners may be from any single political party. The FCC is led by a Chairman who serves as the principal policy advisor to the Commission.
The SEC enforces federal securities laws, maintains fair, orderly, and efficient markets, and facilitates capital formation. It regulates the securities industry, securities exchanges, and other electronic securities markets, as well as tender offers, proxy and tender offers, securities and securities markets, and other activities and organizations, including municipal advisors and employee benefit plans.
When the U.S. Securities and Exchange Commission (SEC) uncovers evidence of wrongdoing, it has the authority to conduct an administrative hearing and impose sanctions. The findings are then presented to an independent SEC employee, who acts as a judge. They then make an initial written decision, stating findings and conclusions.
Intentionally doing something illegal is a crimenot a disciplinary measure. The SEC uses its resources to pursue those who knowingly commit legal violations and ensure justice is achieved. Any violations can result in a severe fine or lengthy imprisonment.
