What Types of Securities Fraud Is the SEC Most Interested In?

What Types of Securities Fraud Is the SEC Most Interested In?

Regulating the securities industry and sanctioning fraud is the responsibility of the Securities and Exchange Commission (SEC). The SEC has limited resources, so while all securities fraud is of interest to it, they do have to prioritize what to investigate.

This means that certain types of securities fraud are more likely to catch the eye of SEC personnel than others. All things being the same, the SEC is most likely to prioritize cases where the most investors are at risk. The more likely the stock market is to be destabilized by the fraud, the more urgently the SEC needs to act.

With that in mind, these are the types of securities fraud most likely to be investigated by the SEC:

Accounting Fraud

Accounting fraud is always of interest to the SEC, especially when it takes place within a large, publicly traded corporation. For example, if the company is using non-GAAP measures to hide recurring losses from investors, the company could be on the brink of collapse but appear financially solvent.

If the company eventually suffers a financial collapse, it could effectively act as a sort of financial sinkhole, taking investors and dependent companies with it. In the worst-case scenario, this type of fraud has the possibility to be incredibly destabilizing.

Insider Trading

Insider trading is illegal because it gives the insider investors an advantage over non-insiders. If insiders become aware of material information that isn’t known to the public, they are legally prohibited from making trading decisions based on it.

For example, if a company has a number of safety violations that have gone unaddressed, the company’s stock price could tank once the information becomes public. If a safety report is about to be published and insiders sell off all their stock immediately beforehand, they’ve effectively duped the purchasing investors with their insider knowledge.

Pyramid Schemes

If a pyramid scheme goes on for long enough, it can eventually affect hundreds of investors—potentially even more. Inevitably, the pyramid will reach a size where it can no longer bring in enough new investors to support all of its tiers and the scam will collapse, taking everyone involved with it into financial ruin.

Because of the great potential to impact a large number of investors and destabilize markets, stamping out pyramid schemes tends to be a high priority for the SEC.

Inappropriate Auditor-Client Relationships

The SEC has become increasingly interested in auditor conduct in recent years. The SEC relies upon auditors much like they do whistleblowers. Auditors are essential to maintaining the integrity of the financial markets.

When auditors develop inappropriate relationships with their clients, they can lose their objectivity, making it difficult or impossible to produce accurate audit reports. Faulty audits can allow dangerous fraud to continue for an extended period of time.

Expose Securities Fraud to the SEC

If you’ve encountered one of the types of securities fraud listed above—or any other type—contact Meissner Associates for a free, confidential tip evaluation. We can help you report what you’ve discovered to the SEC, protect your rights, and maximize your reward.

To get started, just call 1-866-764-3100 or complete the form below.

Explaining the SEC’s Office of the Whistleblower

SEC Office of the Whistleblower

In 2010, the Dodd-Frank Act was signed into law, and with it, the Security and Exchange Commission’s (SEC) Office of the Whistleblower was born. Since then, the Whistleblower Office has issued millions of dollars in rewards to whistleblowers, sometimes reaching into the tens of millions for individual rewards.

Ever since the 2008 financial crisis, animosity toward Wall Street and the financial industry has never been higher. Many people forget just how young the Office of the Whistleblower is and what life was like for whistleblowers prior to its foundation.

Before the Office of the Whistleblower

It’s often forgotten, but the SEC actually did have a whistleblower bounty program prior to Dodd-Frank. The program never received much attention, however, and whistleblower tips were few and far between.

As a result, whistleblower bounties were rarely issued. In all likelihood, the lack of rewards issued was also partially responsible for the program’s anonymity, thereby ensuring the program would languish in obscurity.

The Office of the Whistleblower Is Born

Once the financial markets crashed in 2008, it became obvious that more effort needed to be made in encouraging whistleblowers to come forward. Lawmakers worked with experienced advisors to develop a system of rewards and legal protections, which eventually produced the Dodd-Frank Act.

The legislation included a provision that established the SEC’s Office of the Whistleblower. The Office would regulate the financial industry and enforce federal anti-fraud provisions. Because the industry is so vast and complicated, the SEC Whistleblower Program included several sections intended to encourage whistleblowers to provide the SEC with relevant information regarding fraud.

Tips, Complaints, and Referrals

The Office accepts securities fraud tips through a number of different means, but most whistleblowers choose to work through a whistleblower attorney, as doing so allows the tipster to remain anonymous.

Whistleblower lawyers submit tips through a Form TCR, which is then considered by the SEC’s attorneys and experts. If they decide the tip has merit, an investigation will be launched in order to determine if fraud is taking place and what its extent is.

If fraud is found, the guilty entity will be penalized, often involving monetary sanctions. Depending on how complete and original the whistleblower’s information was and whether he or she was helpful during the investigation, the whistleblower can then claim a whistleblower bounty if more than one million dollars was collected by the SEC. The whistleblower’s reward will be between 10 and 30 percent of this amount.

Contact the SEC’s Office of the Whistleblower

If you have knowledge of securities fraud or corporate corruption that represents a danger to investors, the Office of the Whistleblower might reward you for what you know. An attorney from Meissner Associates can protect your identity while helping you maximize your reward.

To learn more, just contact us to arrange a free, confidential tip evaluation. We’ll help you determine how good your information is with no risks involved. To get started, just complete the form below or call us at 1-866-764-3100.