Stock Fraud Information

Stock fraud occurs when a broker manipulates customers into trading stocks without regard for the customer’s interests. Stock fraud can be orchestrated at the company level, or can be committed by a single employee; stock fraud can also range in size financially from multi-million dollar deals to penny stocks, but stock fraud consistently involves intentional disregard for the financial situation of customers and obsession with personal gain.

Stock fraud is comprised of a few basic categories, with enormous variations on each. Some examples of broker-related stock fraud:

  • Misrepresentation/Omission : this form of stock fraud occurs when the broker intentionally misleads the customer about material facts regarding the stock. Stock fraud involving misrepresentation or omission often disguises risk factors associated with that particular stock.
  • Unsuitability : stock frauds involving unsuitability occur when the broker recommends stocks that are outside the client’s risk tolerance. Stock frauds committed through unsuitable matches allow the broker to push undesirable stocks; this stock fraud frequently results in losses much higher than the client can bear.
  • Overconcentration : failure to diversify a client’s portfolio can be a form of stock fraud. In order to protect a client’s assets, the broker should vary the types of stock purchased, stock fraud through overconcentration strips the client of the protection diversification can afford.
  • Churning : In order to create additional broker’s fees, a form of stock fraud called “churning” is used. Churning requires a large numbers of transactions; often this form of stock fraud consists of selling stocks with small gains in order to show a profit.

More elaborate forms of stock fraud may occur at the executive level, and in some cases, investigators have found that stock fraud is essentially company policy, with many employees taking part in committing or concealing illegal practices. Stock fraud on the larger levels can destroy entire companies by manipulating their stock values, but some stock fraud schemes are actually designed to keep failing businesses funded, using the same tactics. Many stock fraud investigations in recent years have found an enormous amount of insider trading: brokerages committing stock fraud by selling IPO stocks before the release date to favored clients and friends; corporations construct stock fraud schemes designed attract and retain customers and investors.

All forms of stock fraud are designed to violate the investor/broker trust. The key principle of stock fraud is that the investor’s interests are secondary to the financial gain the broker can make. Stock fraud can destroy individuals and business simply by manipulating the stock market. If you suspect that stock fraud caused you to lose investments, you may wish to contact an attorney familiar with stock fraud law. A good attorney can help you determine if you have a potential stock Fraud Claim that would enable you to recover financial losses.

Stock Fraud Lawsuit

The incidence of stock fraud appears to be on the rise, but the recent Wall Street analyst scandal has allowed for laws to be changed in attempts to amend the situation. Stock fraud lawsuits are being filed by individuals that have suffered great financial loses because of the fraudulent practices. For years, stock fraud practices have taken advantage of unassuming investors that trusted financial institutions were advising people based on unbiased interests. Long overdue, the SEC and lawmakers are hoping that finally uncovering the fraudulent practices will allow significant positive changes to be made and people can recover what rightfully belongs to them in stock fraud lawsuits.

The Wall Street scandal exposed the deception that has allowed the nation’s largest investment firms to profit off of stock fraud practices. Although investor confidence may have reached an all time low, for some people the scandal was not surprising and it was only seen as a encouraging event, allowing stock fraud lawsuits to help fix past wrongdoings and to prevent anymore instances of stock fraud in the future. Considered the largest overall monetary payment in Wall Street history, a $1.4 billion settlement was reached with 10 Wall Street banks accused of stock fraud.

The settlement will now allow those wronged by stock fraud to pursue stock fraud lawsuits. The investment banks were issuing biased company research in order to gain investment banking business, and the stock fraud hurt many people. The future actions the individuals take against companies remains to be seen, however stock fraud lawsuits are expected. For more information on stock fraud lawsuits, please contact us .