Securities Theft

Individuals who seek investments must tell clients the truth about their businesses, according to the Securities Exchange Commission (SEC). Additionally, brokers who sell securities must treat clients honestly and fairly, putting the client’s interests first. The requirements designed to maintain high industry standards and the general “antifraud” provisions of all federal securities laws must be complied by the brokers, and other securities market participants.

The individual exchanges have numerous rules and regulations which are designed to protect the investors and include those regarding fraud or theft. When a broker appropriates money from a clients’ account for the brokers’ personal use and it is without their clients’ permission, theft in the securities industry occurs. Fraud can also occur in a variety of ways. Unfortunately, high standards of conduct are not always followed, even with all of the rules and regulations in the industry and sometimes investor’s loose significant sums of money due to theft or fraud and are harmed.

The National Association of Securities Dealer’s (NASD) Rule 2120 about the use of deceptive, manipulative, or other fraudulent devices states that brokers may not always effect any transaction in, or induce the sale or purchase of, any security by means of any , deceptive, manipulative or other fraudulent contrivance or device. Numerous instances of fraudulent conduct have been reported by the NASD. Among some of the more frequent fraudulent activities, the customers should be aware of:

• Discretionary Accounts – The transactions in discretionary accounts that are without the actual authority from a customer or in excess of.
• Unauthorized Transactions – They cause the execution of transactions which are unauthorized by a customer or they send confirmations of orders to a client to make the customer accept a transaction which was not actually agreed upon.
• Misuse of Customers’ Funds or Securities – Unauthorized borrowing or use of customers’ securities or funds.

In addition, other fraudulent activities, such as non-disclosure, forgery, or misstatement of material facts, various deceptions, manipulations, have been identified by the NASD and they are in violation of the NASD rules. These activities are also subject to criminal and civil laws and sanctions of state and federal governments.

General “antifraud” provisions prohibit misleading omissions or misstatements of material facts, and manipulative or fraudulent acts and practices, in connection with the marketing, sale or purchase of securities.