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The Lowdown on Securities Fraud
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Student Contributor
Posted April 30, 2019
The world of investing is constantly growing and shifting. With each passing day more investors enter the market and so, too, do more fraudsters, who may be looking to take advantage of increased participation in the stock market and society’s limited investing knowledge. With that in mind, the best protection against fraud is knowledge and there’s a few traits widely exhibited by fraudsters that are good to know.
What is securities fraud?
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Fraud in general is defined as deliberate deception to secure unfair or unlawful gain, which almost word-for-word describes securities fraud. The primary difference is where the fraud takes place. Securities fraud revolves around all different types of investments, be it stocks, bonds, mutual funds, and more. Fraud may involve investments that don’t exist at all or investments that are not what they seem. All variations of securities fraud seek to generate profit by duping investors and, more often than not, causing losses to those ensnared.
Who is targeted for securities fraud?
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Unlike forms of fraud that seek to target specific demographics, perpetrators of securities fraud typically seek to target everyone. Fraudsters want to make lots of money, but many of these schemes are powered by the sheer number of people investing. They’ll typically try and make their “investments” seem attractive to a wide array of investors. After all, who doesn’t want to get rich quick?
Signs of securities fraud
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Although securities fraud is constantly changing and adapting, there’s a few consistent traits that can be used to identify a potentially fraudulent investment. It’s always worthwhile to keep a lookout for:

- “Guaranteed” returns (i.e. little or no risk)

- Promised returns far exceeding the market average

- Unsolicited offers for investment purchases

- Securities that are unregistered with the U.S Securities and Exchange Commission (SEC)

- High-pressure sales tactics (i.e. “once-in-a-lifetime opportunity”)
Tips for avoiding securities fraud
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With all this in mind, there are some good tactics to practice for avoiding securities fraud. The best ones to commit to memory are:
Do your own research and look at any investment skeptically.

- Avoid unsolicited offers, or at the very least verify the credentials of the seller.

- Cross-check all your findings with information from the SEC.

- Ask questions.

- Avoid any unregistered securities and double-check any claims of registration with the SEC.

- Avoid any securities claiming to be “endorsed” by the SEC, as they do not endorse any securities.

- Don’t fall for high-pressure sales tactics. If the investment can’t wait, then it is likely fraudulent.

- If you can, check with a registered broker, financial advisor, or an attorney about any investments.

- Never forget the old adage; if it seems too good to be true, it is.

For more on securities fraud and its prevention, check out and

Suspected securities fraud can also be reported to and as well as any law enforcement agencies (local or state). 
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