Articles Tagged with securities

Anytime you decide to invest, you always do background research on the asset or security, right? It is important to know the why and how of an asset or security’s performance before deciding to invest.

Shouldn’t this be the same for your investment broker?

Whatever security in which you invest, it is important to know who your investment broker is. Knowing your investment is in the right hands goes a long way in ensuring the security of your investment.

Low Interest Rates Remain

The Federal Reserve has decided to leave interest rates alone for the foreseeable future, according to a report from Reuters. Despite the fact that a target rate-hike was announced last December, the Fed has deferred any increases as part of a long-term plan to reignite the U.S. economy.

President of the Minneapolis Federal Reserve, Neel Kashkari, stated that “the U.S. economy has room to grow before it overheats”.

Yesterday, in a case of investment fraud, the S.E.C. formally charged two former accounting executives with falsifying the financial performance of a real estate investment trust. It is alleged that the former executives of VEREIT Inc., then known as American Realty Capital Properties (ARCP), purposefully and knowingly overstated quarterly earnings by inflating figures in a key accounting metric used by investors and analysts to assess the financial performance.

Former Chief-financial-officer, Brian S. Block and former Chief-accounting-officer, Lisa P. McAlister attempted to defraud investors by manipulating how the company’s adjusted funds from operations (AFFO) were calculated. AFFOs are used by accounting analysts as a non-GAAP measure to further asses the investment value of a company. They are used by companies in addition to mandatory generally accepted accounting principles (GAAP) enforced by the S.E.C. While these non-GAAP methods usually serve to provide a more detailed assessment of a company’s financial performance, fraudulent claims mislead investors as to the viability of  their investments.

In this case, the AFFO was used as the primary company measure for providing earnings guidance to its investors. Though the company had, in fact, fallen short of its projected earnings for the quarter, the former executives concocted the investment fraud scheme to conceal those figures before issuing their earnings statement. Investment fraud like this not only jeopardizes investors’ capital, but also severely damages a company’s credibility and good market standing.

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