A false statement regarding a company or its stock value is one type of securities fraud. Insider trading, the buying or selling of stock with information that the public does not know is also a crime. One might know something about securities regulation in order to avoid committing this crime. An officer of a Texas company purposely might not correctly report financial information to its shareholders; this is a felony.
Securities fraud may happen when a company fails to report its expenses. This may cause a company to appear more profitable than it really is. This misleads shareholders, cause them to buy shares in a less-than-healthy company. There are other types of this crime of which you might want to be aware.
Insider trading happens
Using confidential information about a company to buy or sell stocks has consideration as insider trading. Felonies occur when people, possibly inside the company, act on this information that the public does not yet know. An example would be an accountant who knows the company is in trouble; he sells his stock even before the board receives notification of the issue. This may be insider trading.
Misrepresentation by a third party
Giving out false information also is a crime. Under this type of action is the “pump and dump” scheme. It occurs when a third party buys a large amount of shares in a small, unknown company. They then send out false information to encourage people to buy shares in this company. The value of the stock goes up, and the person committing the crime makes money when they promptly sell their shares.
Securities fraud is a a crime. Insider trading, misrepresentation by a third party and fraud by the company itself are all forms of this type of crime regarding stock value.