How it’s Possible to Commit Securities Fraud Without Trading

Security Fraud

Fraud is unfortunately an occurrence which happens in society which has drastic impacts and negatively affects all people involved. Committing security fraud is often thought of as a shady trading practice, however, not all security fraud involves trading securities. An example of a traditional security fraud could possibly be insider trading, practicing deceptive sales techniques to push a product or service on an individual, or lying about financial numbers to stockholders & stakeholders. While these are all examples of security trading securities fraud, an example of a non trade security fraud would be manipulating or indirectly performing deception through new investment vehicles such as Bitcoin & other unregulated cryptocurrencies.

Non Trade Security

The common conflict that occurs with non trade security fraud activities is that they are often subjective and not concrete as a trade involved security fraud. There are generally no exact numbers which indicate a fraud has occurred, rather it is a practice or entirely separate investment vehicle such as cryptocurrencies which can be “hacked” or stolen through computers. Another area of the industry where fraud can occur is in sports gambling. The financials aren’t as specifically outlined as they are with traditional security investments. People can be mislead or commit fraud without knowing they are committing an illegal act. Lastly, another area where non security fraud can occur is in providing insurance for people in self driving cars. The area is new to both start up companies and customers alike. There are a lot of unknowns, given there is no previous history. This opens up the territory to risky investment techniques and deceptive practices.

Future of Revolutionized Industries & Practices

While companies and industries are constantly innovating with technology and improved efficiencies, many areas of these practices will be uncharted territories which opens up the ability for people to abuse the system and commit fraud. The securities Exchange Act of 1934 was enacted to put a stop to several fraud issues that were being committed at the time. However, all of those fraud cases were the first of their time because a lot of the industry was uncharted territory. Someone had to commit fraud for fraud to be identified. The same concept exists with cryptocurrency. It is a relatively new practice with little to no existing regulations. Cryptocurrency was never a thought of lawmakers in 1934 when the Securities Exchange Act was put into place. New adaptations and innovations can sometimes lead to the unfortunate practice committing fraud. However, once it is committed and identified, new laws and regulations can be set into place to help prevent it from happening again in the future.