The securities fraud

The securities fraud is an act committed by an entity intending to manipulate the market through deliberate concealment, or distortion of information. The SEC (Securities and Exchange Commission) acts to regulate against securities fraud by enforcing investment acts and laws.

The securities fraud may be committed by:

  • Brokers-dealers (misleading clients or advising based on inside information)
  • Financial advisors or analysts (purposefully offering poor advice or inside information)
  • Corporations (hiding or distorting information)
  • Private investors (acting on inside information)

Some of the most famous recent examples of securities fraud include the cases of Martha Stewart and Enron.

It is indeed mind boggling when you realize that Stewart, arguably the most successful American businesswoman, chose to sell her shares in ImClone to save much less than $100,000! Compare this to hundreds of millions her personal wealth is valued at and you understand how treacherous greed can be.

Stock trading or investing can be profitable without resorting to fraud, but tell this to Bernie Madoff or his clients.

The Enron scandal was much more serious, being called "the most important corporate scandal of our lifetimes" by a securities law historian Joel S. Seligman. It unfolded about the same time as Stewart's and resulted in major changes to the securities law.