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Understanding ways that companies abuse securities law

Securities are representations of company ownership; whether that's a stock, bond or option. There are federal laws that govern the way that securities are traded in the United States. This is to ensure that the buying and selling of securities are done fairly, and it protects the integrity of the practice.

There are three main types of abuse that companies can engage in that breaches securities law. The following is an overview of the types of company abuses that can occur, and the negative effects that this can have on investors.

Securities fraud

Unfortunately, companies can set out to deceive potential investors by giving false financial statements or not giving full disclosures. This can mean that an investor purchases stocks based on false information. As a result, they may lose the investment that they made. This is known as securities fraud.

Market manipulation

False information can also be spread regarding the securities themselves. A potential investor could be convinced that a stock price is going to rise very soon, and therefore, may buy securities. If they have been intentionally deceived in this process, it is also a breach of the law.

Insider trading

It is illegal for a person with inside information on a company's activities to then trade stocks. This practice is known as insider trading. Not only is it unfair, but it can also have a detrimental effect on ordinary investors.

If you have lost money due to trading investments, you may suspect that you have been a victim of some type of illegal or unfair practice. If this is the case, you may be able to take legal action and get justice.

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