Stock frauds, manipulations, & insider trading

Summary: An early form of stock fraud was watering, where more shares were issued and sold that were authorized by the company (thus diluting the value of all shares). In a corner, traders sought to control so much of a stock that short sellers (who had borrowed shares and sold the with the expectation of buying back later at lower prices) were forced to buy shares they owed from the manipulator, on his terms. Insider trading is a longstanding issue in securities markets. The issue essentially is how fair and equitable trading can be maintained despite great differences among traders in their knowledge of a company's affairs. After the Securities Act of 1933 created the Securities and Exchange Commission, and the Securities Exchange Act of 1934 gave the commission powers, a 1942 rule known as Rule 10-b-5 established guidelines for stock purchases by major market players or insiders.