Securities Fraud

AAA

DEFINITION of 'Securities Fraud'

A type of serious white-collar crime in which a person or company, such as a stockbroker, brokerage firm, corporation or investment bank, misrepresents information that investors use to make decisions. Securities Fraud can also be committed by independent individuals (such as by engaging in insider trading). The types of misrepresentation involved in this crime include providing false information, withholding key information, offering bad advice, and offering or acting on inside information.

INVESTOPEDIA EXPLAINS 'Securities Fraud'

Allegations of securities fraud are investigated by the Securities and Exchange Commission (SEC) and National Association of Securities Dealers (NASD). The crime can carry both criminal and civil penalties, resulting in imprisonment and fines. Some common types of securities fraud include manipulating stock prices, lying on SEC filings, and committing accounting fraud. Some famous examples of securities fraud are the Enron, Tyco, Adelphia and WorldCom scandals.

RELATED TERMS
  1. Certified Fraud Examiner - CFE

    A professional certification available to fraud examiners. The ...
  2. High-Yield Investment Program - ...

    A fraudulent investment scheme that purports to deliver extraordinarily ...
  3. Stuffing

    The act of selling undesirable securities from the broker-dealer's ...
  4. Corporate Fraud

    Activities undertaken by an individual or company that are done ...
  5. Insider Trading

    The buying or selling of a security by someone who has access ...
  6. National Association Of Securities ...

    The NASD was a self-regulatory organization of the securities ...
RELATED FAQS
  1. What are the SEC regulations regarding stock splits?

    SEC Rule 10b-17 is the main regulation dealing with stock splits. Rule 10b-17 is an anti-fraud regulation of federal securities ... Read Full Answer >>
  2. Where can I find a company's annual report and its SEC filings?

    Thanks to the Internet, finding financial reports is easier than ever. Nowadays, every reputable company has an investor ... Read Full Answer >>
  3. What happens to the fines collected by the Securities and Exchange Commission?

    When the Securities and Exchange Commission (SEC) enforces a civil action against a corporation or an individual found guilty ... Read Full Answer >>
Related Articles
  1. Investing Basics

    SEC Filings: Forms You Need To Know

    The forms companies are required to file provide a clear view of their histories and progress.
  2. Investing Basics

    The Pioneers Of Financial Fraud

    These fraudsters were the first to commit fraud, participate in insider trading and manipulate stocks.
  3. Investing Basics

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  4. Personal Finance

    Who's Looking Out For Investors?

    If your account has been mishandled, FINRA and the SEC are among several organizations that can help.
  5. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  6. Professionals

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  7. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  8. Investing

    What is Contingent Liability?

    A contingent liability is an amount that might have to be paid in the future, but there are still unresolved matters that make it only a possibility. Lawsuits and the threat of lawsuits are the ...
  9. Investing

    What's Accrued Interest?

    Accrued interest has two meanings. In accounting, it is interest that has been earned, but the time for payment has not yet occurred.
  10. Investing

    What is Absorption Costing?

    Absorption costing is an accounting method primarily used in manufacturing. In absorption costing, the cost of a manufactured product includes the direct costs plus an apportioned share of the ...

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center