Stock Market Fraud and Stock Brokers

Stock Market Fraud and Stock Brokers
Stock Market Fraud and Stock Brokers

Stock fraud usually takes place when stock brokers try to manipulate their customers into trading stocks without regard for the customers own real interests.

Stock fraud can be at a company level, or can be committed by a single stockbroker.

Stock fraud can also vary in size from multi-million deals to penny stocks, but it consistently involves the intentional disregard for the financial situation of the customers and with personal profits.

Below find some examples of broker-related stock fraud:


This form of stock fraud occurs when a broker intentionally misleads the customer about material facts regarding the stock.

Stock fraud involving misrepresentation or omission often disguises risk factors associated with that particular stock.


Stock frauds involving unsuitability occur when brokers recommend stocks that are outside the client’s risk tolerance.

Stock frauds committed through unsuitable matches allow the brokers to push undesirable stocks.

This stock fraud frequently results in losses much higher than the client can bear.


Failure to diversify a client’s portfolio can be a form of stock fraud. In order to protect a client’s assets, the broker should vary the types of stock purchased, stock fraud through overconcentration strips the client of the protection diversification can afford.

Stock Market Fraud


In order to create additional broker’s fees, a form of stock fraud called “churning” is used.

Churning requires a large numbers of transactions; often this form of stock fraud consists of selling stocks with small gains in order to show a profit.

Stock fraud on the larger levels can destroy entire companies by manipulating their stock values, but some stock fraud schemes are actually designed to keep failing businesses funded, using the same tactics.

Many stock fraud investigations in recent years have found an enormous amount of insider trading:

Brokerages committing stock fraud by selling IPO stocks before the release date to favored clients and friends; corporations construct stock fraud schemes designed attract and retain customers and investors.

All forms of stock fraud are designed to violate the investor/broker trust!

The key principle of stock fraud is that the investor’s interests are secondary to the financial gain the broker can make.

In Part by: Stock Fraud Newswire