Each day, investors in Rhode Island and the rest of the nation depend on certain information before they decide where to invest their money. These people base many of their decisions on the values of companies. Sometimes, these investors get inaccurate information or learn things they shouldn’t have. Here are three situations when business information can result in securities fraud.
Sharing confidential information
Business professionals spend a lot of time hearing information from their colleagues and managers. To protect private information from becoming public, companies have confidentiality rules in place. If someone shares private information, the other party can act on it from an investment standpoint. This is a type of securities fraud known as insider trading.
Leaving out information
It’s understandable to assume that people only commit federal felonies when they share too much information. However, business professionals can potentially face criminal charges for leaving out information about a company. More often than not, people leave out business-related information if it isn’t going to go over well.
Falsely inflating a company’s value
The third type of securities fraud is more commonly known as a pump and dump scheme. In this scenario, one or multiple parties would share enticing information about a business to potential investors. For instance, someone will share a false tip that gets investors to buy shares of a business or other types of equity and raise its price. This allows the tip sharer to profit from the pump and dump their shares while the other investors take the financial hit.
As you can see, there are several ways to commit securities fraud. Considering the seriousness of these crimes, it’s imperative to think twice about sharing or leaving out business-related information.