Sales and Investment Fraud Essay Example | Topics and Well Written Essays - 1500 words

Sales and Investment Fraud - Essay Example Investment frauds are the sale of fraudulent and worthless investments to unsuspecting investors. Sales of worthless partnership interests and telephone marketing frauds are among the common categories of investment frauds (Albrecht, Albrecht and Albrecht 2009, p12). When sales and investment frauds occur, investors, the government, and customers are bound to lose financially in one way or another. According to the Federal Trading Commission (FTC) (2011), investment fraud represents over 50% of consumer dollar injury noted by the organization’s Telemarketing Complaint System. The organization notes that on average, consumers lost 15,000 USD per fraud. In 1996, the organization challenged a case in which fraudsters made more than 100 million USD in total from several consumers over the period in which the scams occurred (Federal Trading Commission 2011). When investments and sales frauds are committed, in many cases a breach of taxation regulations also occur. This means that the government gets to lose valuable incomes as the fraudsters never remit taxes from illegal activities. Investment frauds such as insider trading can impact greatly on the performance of a company in the capital markets. People start distrusting investment companies since they fear that they may be defrauded. Similarly, when the public becomes aware of cases of sales frauds leading to a company’s poor reputation, the company is bound to encounter reduced sales as customers opt for other suppliers. The loss of reputation can negatively impact the company’s performance in the stock markets. In this type of fraud, the early investors are paid with assets of the later investor and thus they tend to believe they have great investments and tell their friends, family, and associates. The phenomenon is capable of creating many customers.