Securities fraud poses a major threat to the financial security of millions of investors. Stock fraud and the brokerage firms perpetrating it thrive, bilking investors out of millions of dollars annually. The North American Securities Administrators Association (NASAA), an association comprised of state and regional securities regulators, estimates that investors lose $6 billion a year to investment fraud, including micro-cap stock fraud.1 In 2000, Bradley Skolnick, the Indiana Securities Commissioner and former head of the NASAA, stated that boiler rooms were “the single greatest source of investment scams.” Yet defrauded investors are unlikely to recover funds lost to fraud, because these firms rarely operate with adequate reserves to pay settlements or awards. Furthermore, the firms, their principals, and their brokers typically declare bankruptcy to avoid liability.
Clearer Skies for Investors: Clearing Firm Liability Under the Uniform Securities Act,
San Diego L. Rev.
Available at: https://digital.sandiego.edu/sdlr/vol39/iss4/6