5 Things Every Investor Should Know About Securities Fraud

Being a young investor where you are still learning the game, there are many things that you need to be careful about. With so many options where you can make a costly mistake, every move you make has to be thought out well.

Frauds are present in every sphere of our lives. Some people have found a way to earn money by tricking others into lies and schemes, and it works. For that reason, you will need to keep yourself well informed and learn how to spot these security frauds so you can stay away from them.

What are security frauds?

Every situation where an institution or a person who represents themselves as an investment insider with unreal offers is usually a fraud. It is one of the most common criminal activities that trick many young and inexperienced investors. You are being offered profit that you will never receive, and you spend your finances in vain.

There have been calculations of annual losses of people who reported that exceeds several billion. This should be a visual indicator of how serious these trickeries are, and why you should do your best to stay out of them.

Understand its types

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Source: securitymagazine.com

Although there are many possible ways of how an institution or a broker can trick other people into an investment, there are a couple of fraud types that you need to understand.

Firstly, we have the pumping trick where the broker has already invested in a stock that has no circulating volume. He then gathers a mass and gaslights them about the quick profit they can make, and how great of an opportunity this is.

People who fall and put their money on that stock, where the price rises because of its demand. The fraudsters are then selling their shares taking up their huge profit, and leaving the others with significant losses.

Secondly, we have inside trading where you have presented information that nobody else has. This means that you will receive an offer to invest in something that will surely blow up the next day without any potential risks. This is almost always a trick since there is nothing riskless that can bring you such benefits.

By doing accounting tricks, some firms keep purposely modifying books to give a false representation of the company. That way, people might think it is a good thing to invest in something like that. When they see the real picture, it can be too late.

There are various examples of frauds that people have fallen on in the past. The pyramid schemes are something that has been proven as an unprofitable method for new investors. By being promised quick finances, you are being forced to find new people who will engage and place their finances there. This is funding yourself, and you are being as bad as the person who tricked you in.

Another example is fraud where the firm or the person who has gained your trust for financial decisions is asking for advance money. They are allegedly being used for documentation or covering certain expenses to secure a special investing opportunity. The fact is, there is no special investing opportunity, and you are just being sucked off your finances.

How to spot a fraud

Source: kendal.org

Although these institutions are always finding a way to look professional and legitimate, there are always some indicators of securities trickery.

1. Unreal offerings

The first thing that needs to be suspicious to you is their promises of quick financial gain and not a chance of a loss. There is no such thing as investing, and you should not believe in anything presented to you in this way.

2. The need for quick decisions

Every decision that you make needs to be thought out completely. Think from various perspectives, and only then act appropriately. If the investing institution is forcing you to think of a decision on the spot, or pressures your decision, just stay away from them.

3. The need to bring more people

more people
Source: inc.com

Being told to bring more people to the organization. This is usually a scheme, so you should stay out of it. People who are higher on the pedestal are indeed earning good finances.

However, to get in their spot you will need a lot of time, bothering a lot of people, and spending your finances without a significant benefit. This is why these projects are highly unprofitable for a regular investor and should be avoided.

4. A false picture of the establishment

Many of the fraudsters have developed their firms and sites to look as legitimate as possible. By combining various diplomas and certifications, you are being told how they are being one of the best places you can entrust your funds. In addition, they can serve you a story of how their experience has made a lot of their clients rich.

Before you proceed with anything, make sure you check if any of this is correct. The best way you can do that is with advocates that already have experience in this area. For example, you can contact www.mdf-law.com to check the legitimacy of the situation.

5. False regulation statements

Source: globalcapital.com

To get your trust, many of the fraud financial organizations are using the regulation to show their professionalism. The regulation companies are being made to ensure the financial safety of the clients, and protect their personal information at the same time.

Before you take this information for granted, make sure you check if it is true. The best thing you can do is contact your advocates, and have them check this for you. If they are lying about the regulative, you should stay away, and protect your finances.

Protect yourself

Investing is a complicated act that is filled with risks and potential losses. For that reason, you need to protect yourself the best you can.

By implementing your knowledge, and truthful information you can gain from any source, you are instantly slimming the chances of being tricked. In addition, you should consider getting an advocate to protect your investments, and fight any frauds you might be a victim of.

Besides an advocate, if you are being scammed, you should immediately contact the bank that you use and the authorities, and hope that the people will be caught. At least you will prevent the same fraudsters to trick other people which is always a good thing.