Common Ways Companies Mislead Shareholders

There is a fine line between giving shareholders the information they need and full-blown securities fraud. But, when a corporation or individual intentionally misleads shareholders, fraud has occurred.

There are a number of ways that companies mislead investors and shareholders alike, but some occur with alarming frequency. Below, we discuss the most common ways shareholders are misled.

Providing Misleading Financial Information

First, before an investor becomes a shareholder, they’ll likely want to know about the financial situation of the corporation and its expected success. When an individual or company provides misleading information about financial records, usually by inflating their current or future success, they are committing fraud by convincing an investor to invest with incorrect information.

Going Private Transactions

In a going private transaction, or series of transactions, the corporation will delist and deregister its stock and cash out shareholders so the company can retain any outstanding shares. This becomes illegal when the company keeps this information from potential investors or board members. This is what’s known as ring fencing.

Subvert Shareholder Rights

Every shareholder has rights they are entitled to when they invest in a corporation. When someone misleads the shareholder in any way, whether it be to get them to invest in the first place, or make decisions on their behalf without the permission of the shareholder, the individual is committing securities fraud by undermining the rights of the shareholder.

Reach Out to an SEC Whistleblower Lawyer

If you believe you have information about an individual or corporation misleading their shareholders and you want to do the right thing, reach out to a qualified SEC whistleblower lawyer at Meissner Associates. We can provide adequate legal representation for you to report your information to the SEC. Call our office at 1–866–764–3100 or visit our website for more information.