When you think of securities, think of stocks and bonds. The formal definition of a security is a fungible, negotiable financial instrument that holds monetary value.

In more practical terms, securities are a type of investment that includes:

  • Stocks – ownership interests in a publicly-traded or private company,
  • Bonds – a loan from an investor (you) to a borrower (a company or government body),
  • Banknotes,
  • Investment contracts,
  • Options – the right to buy an ownership interest (i.e., stocks and bonds) or other assets at a specific price within a particular time period, or
  • Any combination of all of the above.

A “commodity” is a good that is traded on the open market, such as gold, oil, and natural gas.

An Investor can buy and sell options on commodities that allows buying or selling at a certain price at a future date.

Thus, if somebody who is involved with securities and commodities, like a broker or investor, lies in order to get a financial advantage, they could be facing federal criminal charges of 18 U.S.C. § 1348 securities and commodities fraud.

There are two categories of behavior related to executing an illegal scheme:

  • defraud somebody in connection with commodities, options, or securities transaction;
  • obtain money by false pretenses, representations, or promises related with a commodity or securities transaction.


The Securities Act of 1933 regulates the offer and sale of securities in the United States.

The Securities and Exchange Commission (SEC) enforces the laws and regulations under this act and investigates violations. Some common violations include: 

  • Fraudulent schemes, such as ponzi or pyramid schemes,
  • Theft of money or securities,
  • Insider trading,
  • Pump and dump,
  • Churning,
  • Boiler rooms,
  • Accounting fraud,
  • Manipulating the market price of an investment,
  • Making false or misleading statements about a company,
  • Selling fraudulent or unregulated securities, or
  • Violating the broker-dealers’ responsibility to treat customers fairly.