6 Questions
What is securities fraud, and what are some common types of fraud that fall under this category?
Securities fraud involves deception of investors or manipulation of financial and stock markets. Common types of fraud include insider dealing, accounting fraud, and misrepresentations.
What is insider dealing, and how does it involve illegal trading of securities?
Insider dealing involves illegal trading of securities by those who have learned valuable information about an entity that is not available to the general public.
What is accounting fraud, and how does it involve manipulating financial information?
Accounting fraud involves maintaining inaccurate or purposefully disseminating false information about an entity's financial status.
What is a misrepresentation in the context of securities fraud, and who might commit it?
A misrepresentation involves presenting misleading or false information to an investor or the general public by parties or players such as brokers, financial advisors, and other types of money managers.
What are some common characteristics of Ponzi schemes and pyramid schemes?
Ponzi schemes and pyramid schemes offer high-yield returns, often with unsolicited investment offers, and guarantee returns that sound too good to be true.
What are some other types of securities fraud schemes, and how do they operate?
Other schemes include using dummy corporations, micro-cap fraud, and penny stocks (bogus offerings).
Study Notes
Securities Fraud
- Involves deception of investors or manipulation of financial and stock markets
- Includes insider dealing, accounting fraud, and misrepresentations
Insider Dealing
- Involves illegal trading of securities by those with valuable information not available to the general public
Accounting Fraud
- Involves maintaining inaccurate or false information about an entity's financial status
- Also referred to as fraudulent financial reporting
Misrepresentations
- Involves presenting misleading or false information to investors or the public
- Can be committed by individuals within an entity (e.g. employees) or parties such as brokers, financial advisors, and money managers
Investment Schemes
- Can offer high-yield returns, such as Ponzi Schemes and pyramid schemes
- Characterized by collecting cash from new investors to pay high returns to earlier investors
- Often involve sending unsolicited investment offers, guaranteeing returns that sound too good to be true
Other Schemes
- Use of dummy corporations
- Micro-cap fraud
- Penny stocks (bogus offerings)
This quiz deals with securities fraud, including insider dealing, accounting fraud, and misrepresentations that deceive investors and manipulate financial markets.
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