Stock fraud has plagued millions of Americans. Companies and brokers alike engage in unethical marketing tactics that result in huge losses to average citizens. Stock fraud is any situation that arises based on the unethical and dishonest actions of a stockbroker that result in the loss of monies to an individual or entity. This can be done in numerous ways, but the primary method of stock fraud comes from misinformation provided by the broker.
Brokers can provide misinformation in a variety of ways:
1. They can lie about the price of a given stock – they may inflate the stock price or communicate a price that is artificially lower to make it seem more enticing.
2. A broker may lie about the potential risk of a stock or company.
3. A broker may overstate the potential profitability of a stock.
4. A broker may fail to act on selling or buying stock according to the wishes of his or her client.
5. A broker may act in their own self interest in the management of a client account, churning stock transactions to increase their commissions and fees or holding off on transactions – ignoring the client’s best interests - so that the timing is more beneficial to them.
A stock broker is, after all, in a unique position of power in relation to his or her client’s money and their influence is powerful. It can clearly lead to great advice and profit or it can lead to significant fraud when a broker violates that trust.
Also, any actions taken by a company or stock broker that widely publicize false information about a stock potential, stock dealer or stock broker can easily lead to stock fraud. Misinformation about stock can seriously impact the affects the market on the price of the stock, which could lead to losses on behalf of the shareholders and investors and benefits on behalf of the brokers or dealers involved.
In some cases, stock fraud extends beyond an individual broker and is in face systemic in a company. For instance, many companies will develop a policy that encourages stock fraud by hiding or concealing illegal practices in the company. This can ultimately lead to a massive stock value crash and therefore to losses for millions of people. Enron is a good example of a systemic and consistent fraud that ultimately adversely affected so many people.
Whether stock fraud is created by an individual or a company, someone is culpable for the loss of money in your stock portfolio and they should be held accountable. In many instances, a stock fraud situation effects hundreds, if not thousands of people and when systemic stock fraud is uncovered losses can often be recouped through class action lawsuits. If you feel as though you have been the victim of stock fraud, you should seek the counsel of a qualified stock broker fraud attorney who can advise you as to your best course of action. You probably aren’t alone and even if your loss is relatively small, when thousands of people with relatively small losses come together they can stop unethical stock brokers from taking advantage of anyone else and they can recoup their losses.