Securities Fraud

Microcap stocks are issued by the smallest of companies and tend to be low priced and trade in low volumes. Many microcap companies do not file financial reports with the SEC, so investing in microcap stocks entails many risks. Federal regulators have taken notice, and are concerned about growing fraud in the microcap stock markets.

Nowadays, securities fraud can involve sophisticated computer fraud and hacking, as the SEC just alleged in an action against a stock trader in Latvia.

The SEC has charged a trader in Latvia for conducting a widespread online account intrusion scheme in which he manipulated the prices of more than 100 NYSE and Nasdaq securities and caused more than $2 million in harm to customers of U.S. brokerage firms. 

There are reports that the Securities & Exchange Commission is going to modify its position of allowing parties to settle securities fraud actions without admitting or denying the SEC’s allegations.

The securities fraud lawsuits filed today by the SEC against six former top executives of Fannie Mae and Freddie Mac lead to a number of questions: 

In a stunning development, the SEC has charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans. 

In 2006, the SEC notified Bear Stearns that it intended to institute proceedings seeking broad injunctive relief and monetary sanctions of $720 million.

Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock markets is of increasing concern to federal regulators as these markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the SEC. 

We would really, really like to get in on a hot IPO on the ground floor. Many people are in the same boat. And, according to federal prosecutors and the SEC, some of them have been defrauded. 

The SEC’s Enforcement Division Asset Management Unit recently has been focused on fee arrangements with registered funds.