Financial Crimes and Fraud Prevention

Registered representatives are expected to spot warning signs, escalate suspicious activity, and understand how fraud, misappropriation, and related misconduct harm both customers and firms. The Series 7 treats fraud prevention as both a customer-protection topic and a compliance responsibility.

This chapter starts with common fraud schemes, then moves into detection tools and internal controls, and ends with reporting duties, enforcement, and penalties.

In this section

• Types of Financial Fraud
  Recognize Ponzi and pyramid schemes, embezzlement, misappropriation, and similar securities fraud risks.
• Fraud Detection and Internal Controls
  Identify fraud red flags, monitoring tools, and internal controls that reduce misconduct.
• Reporting and Enforcement
  Understand SARs, escalation duties, penalties, and the agencies that enforce financial-crime rules.