Stock Scams Cost Investors $1 Billion a Year
The Federal Trade Commission reported recently that Americans are losing $1 billion a year to investment swindlers. Investment fraud is escalating because of the phenomenal growth of online trading and unscrupulous stock promoters. But there are many ways to protect yourself.
If you do become a victim, you can try to recoup your losses in court. This is never an easy option for a single investor because of the costs involved, but if you become part of a class action suit or part of a court appointed receivership, you become a very powerful force indeed.
While the internet has become a playground for investment tricksters, it has also become a valuable tool for those wanting to curb scams and fraud. One website that alerts investors is www.EndFraud.com. Here you can learn how to recognize securities scams, how to alert others and get redress.
Unfortunately, many cases of securities fraud go undetected. Most investors will not even consider the possibility of misconduct by the company in which they have invested until that are faced with the loss of their investment. Because the market naturally fluctuates, not every loss is indicative of fraud, but losses should cause concern and serves as the impetus for further investigation.
According to Endfraud, the following are all warning signs to look out for.
1) Dramatic drop in value of stock in a short period of time.
2) Announcement by the company of wrongdoing (e.g. restatement of earnings, accounting violations or irregularities).
3) Financial results that are markedly different from prior publicly announced expectations.
4) Revelation of a material fact that is inconsistent with a prior representation.
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When a corporation issues misleading information to the public, or keeps silent when it otherwise has a duty to disclose, it is considered MARKET MANIPULATION.
Give yourself credit in determining what is right and wrong. On the face, fraud may not always be a clear, quantifiable event. It has many permutations, and when it is part of a well thought-out scheme by sophisticated corporate insiders, it can often be mischaracterized as a natural market fluctuation or blamed on an uncontrollable macro-economic event. If you feel you have been wronged, then pursue the matter until you are satisfied that either the company has done nothing wrong or that it has committed fraud.
Ultimately, each shareholder has to keep in mind the purpose of court action-to retrieve an investment loss due to fraud, punish the company and/or its directors for committing fraud, prevent them from doing it again and set an example for other publicly held companies that this type of conduct will not be tolerated anymore. |
