Stock Fraud – How and Why!
Money always attracts criminals. If you have it, criminals would definitely go after it. They will lie, cheat, and try to deceive you, convince you that you need to spend your money on something “important”. Of course, if they have no other way, they’ll probably try to force it out of your hand — especially if you’re an investor.
As an investor, you should always pay attention to little things that companies offer you. You should gather as much information you can about the company or companies you are dealing with; it is your money, after all. Here are some of the few questions you should ask yourself so you could avoid stock fraud:
Does the company I’ll be investing in have a good track record? – Keep in mind that a company with a good track record is probably a very stable company with reliable employees. If you could, you should take a look at disciplinary records of their employees, or research on the company’s achievements or activities involving social responsibility. Odds are, if they’re keeping a good track record, it means they make sure that the people they have, and the stakeholders they work with are responsible people who would ensure the success of their company’s goals. A good company would have very little, if at all, cases of stock fraud in their history.
Do they send me good information? – Does a company or person send you messages, or calls you, or posts on your accounts in your social networks? If it does, do they give you good information? Are they offering money-making schemes that are too good to be true? Are they giving too much detail, and do these details, based on rational thinking lead to actual good money-making results? In what part of the country or the world is the firm based in? These are just some of the many questions you should ask yourself to know they are giving good information. If you’re feeling a little suspicious about it, and you think it’s a stock fraud, you’re most likely right. If it’s something you should invest in, there would probably be a lot of real testimonials for real people out there.
Sometimes you could even tell a reliable company by just looking at its official site. If it’s well-crafted, and provides reliable information, and won’t send you spam mails or open pop-ups whenever you visit their site, then it’s probably a good company. Still, a good common sense and reliable information is important. Always scour for information. Some websites may be misleading—they may look good, but if they don’t provide you with information, or refuse to reply to you or let you visit their firm in person, then you should definitely think twice. Good companies will never refuse to show you their reliability.
Again, never stop looking for information before investing in anything. Money isn’t very easy to get, and you shouldn’t have to be a victim of stock fraud if you do research.
The different types of Stock Fraud
The increasing quality of any country’s economy is enough to tempt some people to commit stock fraud. In countries with high market growth, many criminals try to orchestrate money-making schemes; and with the current technology the world has, it’s easier to make these schemes successful.
Stock fraud, by definition, is the act of misleading people to gain money. Stock fraud is done in many different ways, and if the investor isn’t careful enough, he or she might end up being a victim. Here are some of the more well-known types of stock fraud every investor should know and be careful of.
Corporate Stock Fraud
This type of stock fraud is more often than not very large-scale and complex, and done by corporate executives in large organizations. Corporate stock fraud involves deceiving major stakeholders in a large organization.
Computer and Internet crimes
This type of stock fraud is done through computer technology, mainly the internet. There are many different ways to commit internet crimes: one can spam in e-mails or in chatrooms, post malicious or “sticky” ads in websites, posting freelancer or work-at-home schemes that aren’t real, selling fake or defective items; others even go so low as to “request for donations” for a fake person or a fake organization. Because people can take on dissimilar names or even stay anonymous or incognito, there is a very long list of different types of internet crimes. Unfortunately for the less careful netizen, the rise of technology makes the list even longer.
Insider Trading Stock Fraud
Insider trading is sometimes legal in other organizations, as some organizations allow their employees to buy and sell stock within their organization. Illegal insider trading, however, is when an employee gives an outsider sensitive information about their organization and allows or initiates trading stock from the acquired information.
Accounting stock fraud
This type of stock fraud is done so that the organization can lie about their how much they really earn. Accounting stock fraud enables organizations to lie about how much their company is worth. This is sometimes done to evade tax or controversy. Some activities done in accounting stock fraud are fabricating sales revenues or expenses, lying about actual amounts of debt that the company has, and deliberately creating erroneous records of expenses.
Microcap stock fraud
Microcap stock fraud is a type of a stock fraud that usually happens in smaller-scaled businesses. A little like Internet fraud, microcap stock fraud sells fake stocks through fake business or stock schemes. Also very similar to Accounting stock fraud, Microcap stock fraud releases information about their stocks and “inflates” them, to make them seem bigger than they really are.
One very common trend about all of these types of stock fraud is the act of giving out misleading information. People who engage in these kinds of crime always think of different ways to make a lie sound very truthful or promising. Investors should be aware of this, they should look more carefully, and they should be more observant—because the higher the technology is, the more likely these crimes will thrive.
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