Fraud is a crime, an intentional deception made for personal gain or to damage another individual. Frauds can take place in many ways. One of its major types includes the Securities Fraud. Securities fraud is a kind of modern crime where the victim is the one who trusts a firm or individual and making an investment based on the information he is given by the firm or individual(Stockbrokers). The victim is told false information or mislead by a false advice. These kinds of frauds are normally carried out by fraudulent companies, brokerage firms, stockbrokers, corporations or investment banks. In order to protect investors from being cheated and to protect certain laws are defined by Securities and Exchange Commission.
The types of misrepresentation involved in securities fraud include the following
False information on a company’s financial statement
Withholding key information
Offering bad advice, and offering or acting on inside information (insider trading )
Securities and Exchange Commission (SEC) filings
Lying to corporate auditors, committing accounting fraud
Embezzlement by stockbrokers and
Illegal acts on the trading floor of a stock or commodity exchange.
The securities fraud are committed normally by Brokers-dealers (misleading the clients or advising wrongly based on inside information), Analysts or Financial advisors (purposefully mislead by providing wrong advice), Corporations (distorting information or hiding), Private investors.
The types of securities fraud is as follows

Churning
Unsuitability
Overconcentration
Misrepresentation/Nondisclosure

Churning
Churning an account means making up the mind of investor to invest more only to generate more commission to the brokers. The investor here is misled by a false advice from the broker. The broker makes this to happen only for his benefit instead of the benefit of the client. The broker drives the benefit both from the investor and client side. If the broker seems to have securities in the investors account to an excessive degree then there is the possibility the investors account can be churned.

Unsuitability
Unsuitability is one types of fraud where the investor is recommended to invest that is not appropriate to him. A broker’s duty is to lead the investor in right path by giving proper advice, proper signals and protecting the investors from losing. Broker understands the potential of investor and based on the requirement of client brokers should make recommendations to the clients.

Overconcentration
Overconcentration occurs when individual investments are made too much in a particular company or in a same product which in course of time reduces the value of the investor’s portfolio in the market. The broker who does not guide the investor to change is the one liable if that portfolio’s value declines.

Misrepresentation
Misrepresentation is when a broker provides false information or guides the client in a wrong way by not disclosing the required information’s about the product he is investing which is against the law.
Securities Fraud- Certain Scenarios
Wire Fraud Mail Fraud/ /Bank Fraud
Drug/Controlled Substances Offenses
Military Criminal Law
Administrative Discharges
The Securities and Exchange Commission (SEC) defines the conditions for s security fraud. These conditions are outlined by SEC under section determine the requirements for securities fraud10b-5 (Rule 10b-5) of the Securities Act of 1934.
It will be considered as a fraud under act 10b-5 if
1.an untrue statement (a lie) is made and
2.Making a statement which is not completely true or certain facts are not told clearly.
The one who said false information in order to make a purchase or sale of securities will be considered committing a fraud. The false information told or the fake information used to initiate the purchase will lead to a loss to the victim
Securities Fraud Penalties
Charges made on securities frauds are made only after a lengthy surveillance and enough proofs to prove them guilty. It can be charged against any individuals, traders, stockbrokers or companies if found that they are involved in such fraudulent activity. Punishments made for this type of fraud is such that it won’t affect the people’s lives or financial status instead it takes their time to learn social morals. The penalties can be in any of the below stated form like Probation, Jail time, Significant fines and fees, Restitution, Parole, Community service ,Loss of business or disabled to work within the exchange or marketplace. Thus to avoid all the impacts of the securities fraud lets be aware and alert while making transactions.

Securities Fraud
Securities fraud is a type of fraud that encourages investors to purchase securities, stocks or other investments under false pretenses. This type of fraud can occur when the companies and agents acting for the companies encourage fraud to occur. Investors typically make a purchase decision based upon false or misconstrued information and often lose large amounts of money.
There are so many levels to securities fraud that a common broker must be extremely careful. Insider trading, misleading investors, falsifying documents and other actions are all punishable cases of securities fraud. Cases that involve securities fraud are investigated by both the Securities and Exchange Commission and FBI. Martha Stewart was convicted of securities fraud several years ago for insider trading of certain stocks.
Corporate securities fraud involving companies such as Enron and Countrywide has become extremely common over the past decade. Corporations either alter their paperwork to make their accounts seem better on paper or they act in bad faith to customers allowing business to occur that will end with bad results for investors. The sub prime mortgage crisis involved securities fraud because the sub prime mortgages were bundeled together and sold as mortgage backed securities. These securities had a high risk but were bought up by the thousands by banks and investors. When the high rate of default occurred, many of the returns on these securities were drastically reduced.
Penny stocks have been increasingly used in securities fraud. Many “boilerhouse” firms will push the sales of these stocks as some of the “hottest” companies around. They will state that if you purchase the stock today, they will see it increasing by thousands of percent within a short period of time. While some penny stocks pay off like this, it is very rare to see the type of returns that a scam like this will indicate. Many thousands of individuals are left with less cash and a sour feeling in their mouth about the stock market because they have fallen victim to securities fraud.
Ponzi schemes are yet another type of securities fraud. One of the largest and most recent cases of a ponzi scheme is Bernard Madoff’s investment funds. He used new investors money to pay off the original investors. There were thousands of dollars of cash moved through the entire business and next to none of it was actually invested. The money was instead spent by the benefactors on luxury living items and continuing to ensure investors were happy.
Securities fraud can cost the economy as much as $40 billion dollars per year. Some experts estimate the costs are even higher! Paying attention to what investments that you choose as well as checking past performance is a good idea in any investment. Do not place money in an investment simply because you were asked to. Research the investment and ensure that you are the type of person who wants the risk and possible reward. The prime targets for securities fraud are people over the age of fifty. When an investment company or potential investment sales person keeps stating how excellent their revenue and assets are while stating that their costs and liabilities are very low, it is most likely securities fraud.
Securities fraud can efffect anyone. The Internet has brought many more cases of the crime forward. Be careful when you are choosing where to invest because securities fraud can effect anyone at any time.