Stock market is a place where buying and selling of share takes place and it is quite handy and beneficial if its working remains smooth and progressing. It provides help to the companies to raise their capital on one side and on the other side it provides a chance to the investors to make much more money. But it has been observed that sometimes stock markets become corrupted when they are not regulated properly. There are many forms that can be associated with corruption in a share market. Some forms can be narrated as follows,
Sometimes it happens that the corruption appears in the form of fraud. This fraud can be in different forms too like you hire a broker and you make settlement with him that he will buy share for you but he does not do that and keeps all money in his pocket. A broker can sell your stock to a false company that just exists in imagination. So when the people experience such type of frauds then the worthiness of this market gets down and the people hesitate to put their money in this market.
A stock market can be attributed as corrupted too when certain people have the information about the future of the stock market and they start to act according to this inside information for their benefits whereas this information does not get disclosed to the common people yet. This is called the inside trading and this trading cause benefits to some persons only. So that is why the people have less faith in such markets. People consider this market unfair and try to avoid invest in such markets.
Another type of fraud or corruption can be known as the false statement. These false statements are being provided by the companies who have issued their stock or who are trying to sell it. Pumps and dumps schemes are utilized to raise and decrease the prices of certain stocks up. And these schemes are based on the false information. It is tried to misguide the people by spreading false statements. It happens many times that a company may provide the false information about its status and when they do so they violate the law.
Trading abuses are also known as the form of corruption. In this form of corruption, the situation and trading conditions are being manipulated in order to gain some certain benefits. Actually this activity is done to manipulate the prices in stock market. The most common form of trading abuse is naked short selling. This trading lowers down the price temporarily. The investor gets the benefit from this abuse.
These are the most common forms of corruption that take place in a share market and that become the source of less investment in the market. A person who comes to face such corruption activities, he thinks that this market is unfair, so he hesitates to invest in it with huge amount of money.