Securities fraud can be defined as any practice or action that is implemented with the purpose of convincing investors to participate in the purchase, sale, or transactions of securities and financial instruments as a result of false information. Also known as investment or stock fraud, securities fraud will usually result in the loss of money and/or invest on behalf of the investor and is considered to be a serious violation of securities laws in the United States.
Securities fraud can consist of various and different types of actions or violations, though they will all be considered to be deception conducted for the purpose of inducing investors to provide money for transactions. Among the different kinds of investment fraud, some of the most common include insider trading, embezzlement by stockbrokers, and front-running. However, securities fraud can also include simple and direct theft from investors and the falsification of public records.
Due to the fact that there are many different types of investment fraud schemes, there are those that will regulate how such transactions involving securities take place. These entities or organizations are known as securities regulators.
The Federal authority of securities regulators is the United States Securities and Exchange Commission, also known as the SEC. However, there are securities regulators within the stock brokerage industry as well, such as the Financial Industry Regulatory Authority and various Self-Regulatory Organizations, or SROs. Even though securities regulators exist to oversee transactions and prevent securities fraud, there is still an average of about $40 billion lost due to investment fraud every year.