Home Securities Fraud

Securities Fraud

Mutual Fund Fraud Overview

Mutual Fund Fraud Overview

Mutual funds are investments where fund managers accepts funding from a client and searches around for smart investments on their behalf. Mutual funds can be quite lucrative if the broker is legitimate and if the investments go well. However, if the broker is a fraud or not legitimate, than he/she may be looking to commit mutual fund fraud. There are a variety of ways that mutual fund fraud can be perpetrated. Below are just a couple of ways that mutual fund fraud can be committed.
 
 
One way involves a process known as "churning". Churning investments is when a stockbroker influences the investor to switch companies to invest in, even though a good investment could have been made at the company they were previously with. Stockbrokers may do this as a means to collect more on commission, and may continue to ask their client to keep switching companies in order to keep collecting more and more commissions.
 
 
"Break point fraud" is another form of mutual fund fraud that is perpetrated by the broker. Break point fraud occurs when a stockbroker encourages his/her client to invest in a bunch of smaller funds so they may collect more on the on commission, when it would actually be more cost effective for the investor to invest his/her funds into fewer investments but for a larger amount. For example, it would be more cost effective for a client to invest in one share worth $56,000.00 if they only have to pay 4% on the commission, where as it would be more expensive for the client to invest in two investments of $28,000.00 at 5% each.
 
 
The cutoff amounts effecting the percentage of commission is what is know as the "break points". Knowing that the broker will receive more in commission by ill advising their client to go with the latter option, if the broker chooses the latter than this would be an example of investor fraud.
 
 
It is also important to research mutual fund companies to ensure that they are legitimate in order to avoid investor fraud. Another way to avoid falling victim to investor fraud is to make sure the client the prospectus regarding their potential broker. The prospectus is basically equivalent to a background check, that shows their track record as an broker. It is also important to compare markets and to look at all hidden costs including load funds versus commission percentages in order to combat investor fraud.
 

What Are Boiler Rooms

What Are Boiler Rooms

Studies show that fraudulent investment operations account for nearly a $1 million a month of financial loss in regards to securities fraud.
 
 
A case that demonstrates boiler room activity took place in July 2003. The scam was perpetrated in Cambodia and twenty people were arrested (two Americans, one Australian, fourteen Britons, one Filipino, one New Zea lander, and one Thai. While performing a search and seizure, investigators claim to have a found a $100,000.00 computer server which was utilized to an illegal international telephone gateway.  Inside the boiler room, they also found a stack of computers and hi-tech hardware. The boiler room scheme was executed by using the equipment to cold-call people internationally to lure victims into fake investment opportunities.
 
 
A full prosecution could not be brought against the criminals because of the lack of laws that existed against boiler rooms and the fraud perpetrated. However, a telephone company did sue them for loss of funds they endured as a result of their illegal phone scam. The amount was over $27,000.00.

Quick Overview To The Pump and Dump Scheme

Quick Overview To The Pump and Dump Scheme

A "pump and dump" scheme can be considered a form of online securities fraud 
The US Securities Exchange Commission (SEC) recommends several ways for the public to steer clear of pump and dump schemes.
 
 
They recommend considering the advertisement source. In other words, if the investment firm advertises online, there is a more of a chance that it is a scam. However, there are some legitimate companies that do advertise online, so it's important to conduct extensive research before making an investment. When researching, it is also important to verify that their claims are accurate.
 
 
It is also important to see where the companies trade their stocks. If they trade with a larger stock exchange (i.e. NASDAQ, the New York Stock Exchange, etc.), it is more likely that their company is legitimate versus a smaller company who trades within the OTC market. The SEC also recommends being wary of "high-pressure" sales pitches. These usually come in the form of advertisements claiming to have a "once in a lifetime" chance or other outrageous claims.

Accountant Fraud At A Glance

Accountant Fraud At A Glance

Accountant fraud (or corporate accounting scandals) often occurs as a result of an accountant not disclosing factual statements to their clients (individuals or businesses) about the state of their finances. This can include overstating finances, understating finances, omitting financial information, etc. This kind of "creative accountant" can often lead to clients and businesses recognizing that something is amiss in their finances which can normally lead to an fraud investigation.
 
 
Many accountant scandals are a direct result of accountants simply pocketing their client's funds and lying to to their clients about where the money is going. In most securities fraud lawsuit cases, the clients are duped into thinking that everything is as it should be when in fact it is not. In reality their finances are actually dwindling due to accountants pocketing their cash.
 
 
In many of these cases, the accountants are actually using their clients funds as a means to live a more wealthier lifestyle than they can actually afford. The clients usually end up losing a significant amount of money as a result of this type of fraud. Many times the amount is significant, due to the trusting relationship the clients develop with their accountant.

Understanding Securities Fraud

Understanding Securities FraudThe Stanford Law School
Securities Classaction Clearinghouse released a study that displayed statistics
regarding securities fraud lawsuits between the years of 2006-2007. The study
showed that the number of securities fraud lawsuits rose approximately 43%
during this time period. Securities fraud (aka stock fraud or investment fraud)
is a scheme that involves luring investors into bad investments based on
falsified information. The end result is typically financial loss for the
investor. The investments are usually either bought or sold based on untrue
facts inside of the stock or commodity market. Often times, the data 
located inside of the SEC (Securities and Exchange Commission) files are often
manipulated or fraudulent. Untrue data may also be found in the company’s
financial statements. Securities fraud also allows for other illegal practices
to be committed by the businesses in question. These crimes may include:
embezzlement, insider trading, and stock manipulation schemes.

There are many different types of securities fraud. These schemes can include:
corporate fraud, securities online
fraud
microcap fraudaccountant fraudboiler roomsmutual fund fraudpump and dump