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Misleading statements could count as securities fraud

Companies that are publicly traded must be honest about their performance so that investors can make informed decisions.

For instance, perhaps your company was projected to earn $100 million during a financial quarter. You missed the mark by $30 million. You opted to tell the public that you were doing really well and were even 10 percent over your projections.

There were a few reasons for it. One was just realistically trying to avoid a public loss of faith in the company. You needed more investors, and reporting losses was not the best way to get them. Some of it was also pride. You did not want to admit that your projections were off or that your performance was not up to par.

No matter the reason, statements like this qualify as securities fraud. They mislead the stockholders. They can cause people to invest more when they would have sold, or they can at least keep people invested when they may have looked for other opportunities.

This is only one type of securities fraud. For instance, another could be leaking confidential stock information. This could warn some investors to sell, for example, before the real numbers come out to the public. This is also illegal, as it gives those with the leaked information an unfair advantage while making investments in a system that is supposed to present everyone with the same opportunities.

Allegations of fraud are nothing to take lightly. They can end your career and carry heavy legal consequences. If you are facing such allegations, it is very important to understand the defense options you have.

Source: FindLaw, "Fraud and Financial Crimes," accessed June 07, 2018

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