Securities fraud affects everyone from shareholders to corporate employees. Over the years many laws have been enacted to combat the occurrence of securities fraud. Despite all the legislation and regulation, instances of fraud persist. Most people find it difficult to understand this area of law. Therefore, they are unsure how to protect their assets in the cases where fraud is occurring. The following paragraphs will briefly explain securities fraud and investors can prepare for the worst.
What is Insider Trading?
The term "insider trading" relates to conduct where a confidant of the company uses personal knowledge for financial gain. Usually a company officer will use his or her confidential knowledge of the company's activities and trade on the stock market based on the information not available to the public. This hurts stockholders and the company as a whole because information is withheld from investors.
Business law prohibits third party misrepresentation in the sale of stocks and other securities. Misrepresentation schemes occur when an unscrupulous company attempts to unload a company's stock by making fraudulent claims about the stock's value. The goal is to drive up the stock's value to a high point so that the securities scammer can sell his or her shares for a large profit.
Company Based Fraud
Improper sales schemes, such as that discussed in the preceding section, can also be attempted by the company that issues stock. A common scenario is when an officer lies about the company's financials to gain investor confidence. Again, the idea is to attract more buyers to the stock to raise the market price. At some point those participating in the scheme try to unload their personal holdings to profit as much as possible. This violation of business law leaves the large majority of investors holding stock that is practically worthless.
Saving Your Investments
Any business law attorney will tell you that the best way to protect yourself is to stay informed. It is of the utmost importance to carefully review a company's information and to double check claims with official documentation, such as that available from the SEC. Noticing small inconsistencies can be your best bet at detecting a possible case of securities fraud. If you suspect something awry is occurring it is a good idea to contact a business law attorney about your investments.
Whether you need help with a family law case, like child custody or divorce, or a personal injury matter, Spencer and Jensen, LLC is available for professional consultations. Aside from the issues dealing with securities fraud, your investments can be affected by a family law case involving divorce. To learn how to best protect your investments contact the Sandy law office. Personal injury and child custody cases are also accepted by Spencer and Jensen, LLC.