DISCLAIMER: No one at Stockopedia, including myself, is encouraging you to commit fraud of any kind. THIS IS SATIRE, NOT ADVICE. It is aiming to be humorous, but it should also be educational. By thinking through how and why securities fraud works, investors should be better able to spot when something seems off.
Nothing included here is based on real companies or scenarios. Any similarity to real events is purely coincidental.
So, you want to get rich and have no moral compass? But, you don’t understand Cryptocurrencies? And the role of President of the United States is already taken? Plus, you don’t want to risk actual prison time? Well, securities fraud is for you.
Why securities fraud is a good option:
Hard to prove: Done well, it can be very hard to show that you had an intent to deceive. Arguing that you were unlucky with business conditions or were simply incompetent covers a lot of bases.
Long time until prosecution: If you are unlucky enough to face an investigation into your actions, the complexity of any case, plus an under-resourced police force, means that it will be years before you face any action. Precious years of freedom in your prime to spend your ill-got gains.
Low sentencing: If the authorities actually pin something on you, you can expect a low sentence in a minimum-security gaol.
Ability to repeat the fraud multiple times: It can be hard to repeat certain crimes. Steal from the safe of your employer, and you may have a hard time persuading your next employer to give you the keys to their safe. Not so with securities fraud. As Dan Davies notes in his book, Lying for Money:
It’s a sad fact, as my friends confirm, that if you want to find frauds, your best asset is a list of existing fraudsters. You might have noticed that comparatively few of the case studies we’ve looked at [in his book] were first offences. There’s something about commercial fraudsters that keeps coming back to the same pattern of behaviour.
I would argue that “something” is a lack of enforcement and the willingness for investors to overlook past failures when faced with a great story.
Kudos: While the average golf course will happily grant membership to the Bentley-driving drug kingpin, the other members may be a little wary of their reputation. Not a problem for a listed…
