Corruption in the Stock Market Kaitlyn Poth

What is the Stock Market? Dating back to 1531 the first stock market was created in Belgium where brokers and moneylenders would meet and trade primarily promissory notes, which are promises to pay the other party a definite amount of money, and bonds as there were no actual stocks in this time period. The stock market today is made up of shares of companies that are sold on the global market. These shares can be in the form as mutual funds or as stocks on the stock market. Mutual Funds are investments made up of securities such as stocks, bonds and other assets of the companies. These investments are usually make up a portfolio of many of these securities in the different sectors of the market to make it diversified for the least amount of risk on the initial investment. The stocks on the stock market can be very volatile and are very risky and have the least amount of security on the initial investment but can also have the greatest gain.

How does it work? As more stocks are being sold and traded on the stock market the value of the shares increases because of the great demand. There are only a limited amount of these shares so as more people are wanting to buy these shares the seller is able to ask for a higher price because there are more people wanting them but as the demand for them decreases it so does the price of the share. http://www.investopedia.com/articles/07/stock-exchange-history.asp

How it has changed Over the years the trading of these shares have changed drastically. In 1994 after the crash of the stock market in 1987 they introduced the first internet stock trade therefore introducing the stock market to the online world. Two years later the market data was introduced in real time on cable T.V. A year after that in 1997 the trading floor was closed in the Toronto Stock Exchange and it went fully electronic. Throughout the following years many of the other Exchanges around the world closed their floors and went fully electronic. http://www.pbs.org/wgbh/americanexperience/features/timeline/crash/ http://business.financialpost.com/2011/02/08/timeline-160-years-of-the-toronto-stock-exchange/

Key Stocks Stocks that dominate the stock market according to the dollar value Google Inc has 2 stocks because of a stock split GOOG which trades at approximately $530/share GOOGL which trades at $540/share Apple Inc Currently trading at approx. $530/share Facebook Currently trading at approx. $60/share Power Shares QQQ Trust Currently trading at approx. $85/share Netflix Inc Currently trading at approx. $350/share http://www.nasdaq.com/markets/most-active.aspx

Stock Market Crash of 1927 The stock market crash of 1927 is one of the most famous stock market crashes in history because of the great depression that happen afterwards. It was connected to being one of the key factors that caused the great depression as it had devastated the economy. In the year prior to the stock market it had been a bull market on the rise as investors were confident in their investment. October 24, 1927 also known as Black Thursday was the day that the market crashed as stock prices rapidly fell as investors were selling their stocks. That day 12.9 million stocks were sold. http://history1900s.about.com/od/1920s/a/stockcrash1929.htm

Dow Jones Industrial Average It is the average of the prices of the 30 most significant stocks on NASDAQ and The New York Stock Exchange. Created in 1882 by Charles Dow it is one of the oldest and most watched index in the world. The way it works is by taking the amount the stocks increased or decreased and dividing that amount by 0.14418073 to get the amount of “points” it increases or decreases. This amount is the index on whether the market is “up” or “down”. http://www.investopedia.com/articles/02/082702.asp

Jobs Stock Broker/ Financial Advisor Sell stocks, mutual funds, and bonds Give financial advice to the buyer to achieve financial goals Execute trades on behalf of the buyer Trader Make the trades on behalf of the financial institution or trades themselves Stock Analyst Analyses stocks according to consumer confidence and previous history of the stock Make recommendations on whether to buy, sell or hold the stocks

Jobs Investment Bankers Provide advice and services to publicly traded or private companies Help issue stocks to the public on behalf of the company Financial Reporter Report on the day-to-day events of the stock market

Corruption within Corruption can happen through these examples and more: Price Manipulation-the deliberate attempt to interfere with the operation of the market as well as deceiving the price of the market Insider Trading- illegal trading on the stock exchange for one person's advantage through having confidential information Defrauding Investors- to withhold money from an investor Securities Fraud- leading an investor to purchase on false information Money Laundering- concealing money that was gained illegally

Corruption

Movies about Corruption on Wall Street Corruption within the movie: Stock Manipulation, Insider Trading, Securities Fraud Wall Street 2 (2010) Insider Trading, Securities Fraud Wolf of Wall Street (2013)- based on Jordan Belfort’s memoir Wolf of Wall Street book Money Laundering, Price Manipulation, Securities Fraud www.imdb.com

http://www.telegraph.co.uk/ Cases Jordan Belfort- CEO of a brokerage company and pushed stocks and was guilty of price manipulation, insider trading, and securities fraud from the illegal activity happening within his company Richard Whitney-president of the New York Stock Exchange 1927 and was charged with embezzlement as he embezzled from his clients after the crash. He also stole from the New York Stock Exchange Gratuity Fund after his addiction of the stock market grew. Ivan Boesky- The price of the stock would rise before the information was released which is a main indicator that insider trading and price manipulation is happening within. http://www.investopedia.com/articles/stocks/09/criminals-of-wall-street.asp

Effects Affects the economy surrounding the stock market and the companies involved Investor Confidence-less people likely to want to invest because of risk of losing their initial investment In the case of the Stock Market Crash of 1927 many people committed suicide because of the lose of their life savings.