Securities fraud is a type of white-collar crime in Pennsylvania that entices investors to make a financial decision based on deceptive tactics. This deception often causes investors to lose large amounts of money, breaking securities law. There are several types of securities fraud that have existed for years, but they take many new forms in the internet age.
Late-day and insider trading
Late-day trading involves the practice of executing and recording a trade at a price as if it happened during the day. This practice commonly involves hedge funds, stocks and shares, and it gives the trader an advantage. The market in the U.S. typically closes at 4 p.m., which also applies to foreign countries.
Insider trading is making a profit off stocks from information not available to the public. Another type of insider trading occurs when someone inside the company trades stock or shares without reporting the transaction.
Microcap fraud refers to the deceptive selling of stocks by a company that has less than $250 million in capital. The most common form occurs with penny stock, which usually sells for $5 a share and is not illegal, but the stocks have to meet certain requirements.
A common penny stock scam is the pump-and-dump; this includes the scammer buying large amounts of these stocks. The scammer will inflate the price, attempt to sell them through deception to increase prices from the demand and leave buyers with useless stock.
A Ponzi scheme gets its name from a famous perpetrator of the crime, Charles Ponzi, who was an Italian swindler from the early 1900s. A Ponzi scheme promises investors that they will make a sizeable profit with little or no risk. The investment commonly involves a portfolio rather than goods or services. Investors get paid by the money from new investors, so they think the scheme works, but it fails if new recruits decline.
Securities law is meant to protect investors from scrupulous people, so it can carry stiff penalties. A person accused of fraud or another white-collar crime may seek legal representation to fight the charges.