Though there are some portions of the Business Practices section of the test that can get a little confusing, a bit of common sense here can take you a long way. When thinking about fraudulent activity, simply ask yourself, "is this ethical?" If you come up with a common sense answer of
no, you have most likely answered the question!
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The USA specifically defines "fraud" as:
An attempt by any person, individual or entity "in connection with the offer, sale or purchase of a security, directly or indirectly:
- to employ a device, scheme or artifice to defraud;
- to make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
- to engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person."
Let's just say, for simplicity's sake, that fraud is comprised of lying, cheating and stealing! |
The USA also states that the above definition "applies to any securities offer, sale or purchase, including offers, sales or purchases involving registered, exempt or federal covered securities."
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