FFS - Fraud and Financial Services

Introduction

While investment companies are in business to make money for their shareholders, laws, and regulations limit the activities of the companies to help protect the consumer and to maintain the competitiveness of the industry. Such oversight does not preclude the consumer from taking responsibility for understanding the investment products they are buying. By the same token, while some investment companies may try to defraud the consumer, some individuals will also try to defraud the investment company. Both actions are illegal.

Essential Questions

• What are the rights and responsibilities of the investor?
• What is investment fraud?
• How is fraud avoided?

Key Terms

Better Business Bureau: US nationwide organization that uses established criteria to rate the ethical and community standing of a firm and provides this information as a means to maintain a high level of trust between the businesses and the public.

misrepresentation: A false statement of fact made by one party to another party, which has the effect of inducing that party into the contract.

fraud: Wrongful or criminal deception intended to result in financial or personal gain

credit score: Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repayment history

FINRA: The Financial Industry Regulatory Authority is responsible for oversight of the US financial industry, including licensing and certifying financial advisers.

SEC: The Securities and Exchange Commission is responsible for oversight of the financial reporting of companies who sell stocks on one of the US Stock Exchanges.

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