Fraud is a cause for concern in all markets, but it's present throughout the City, according to financial journalist Tom Winnifrith.
"You get fraud in big companies… but it's more prevalent in smaller companies because there's less oversight," he told City A.M. during a phone interview last week.
The issue of fraud is currently in focus.
The Times reported earlier this month that white-collar criminals were going unpunished in the UK, with just eight prosecutions for insider trading in the past five years.
Winnifrith founded news site ShareProphets in April 2013 focusing on UK-listed shares and reports on fraudulent activity.
"Something we've forgotten in my working lifetime is that companies don't commit fraud, companies don't put out statements that are untrue: individuals do."
Winnifrith believes punishments should be devastating in order to deter fraud.
He suggests fines of 10 times an individual's salary and they not be allowed to work again in, for instance, accounting.
"It should be the end of their career, they should be bankrupted, because of the message it sends to all the others.
"It would not take very many convictions before the City would become a much cleaner place."
The types of fraud Winnifrith reports on is varied: one example is how a company could cook the books is selling shares through a shell company and using the proceeds to buy services from the original company, allowing it to record a profit in its annual accounts.
"There are varying degrees of fraud. Maybe five per cent of fraudsters are people who do it because they can't help it," he said.
"People like that you will never, ever deter them."
Winnifrith reckons the other 95 per cent are ordinary people who "fall into" committing fraud.
"The 95 per cent can be deterred, but you'll only do it if you start sending a few of them to prison," he adds.
"It's the finance director who realises they are going to miss their half year numbers, so he's a bit aggressive with the revenue recognition, brings it forward, accrues a bit of income. And then he comes to the full year and he's brought stuff forward so he's short again!
So he does the whole thing on a bigger scale and eventually it catches up with him."
Winnifrith accused the regulators at the Alternative Investment Market (Aim) and the Financial Conduct Authority (FCA) of not doing enough to deal with fraud.
"There is so much small stuff that goes on with companies just being untruthful about what they say, and if the authorities were to be serious about it, they would start taking these small companies and throwing the book at them. If they did that a few times, then I would have a lot less to report on."
The London Stock Exchange (LSE) deals with rules regarding disclosures and transactions by companies on Aim, as well as the rules for nominated advisers, while the FCA deals with market abuse and misleading statements by firms.
The LSE said that talk about widespread market abuse is without foundation.
"Aim is a highly successful growth market – unique in the world," a spokesman for the LSE told City A.M.
"Whenever breaches of market rules occur, we have rigorously investigated and where necessary sanctioned. For allegations relating to areas outside of our remit, we are fully supportive and cooperate with other regulatory bodies with statutory remit to take investigative and enforcement action in their specific areas of responsibility."
An FCA spokesperson said the regulator takes breaches of disclosure rules very seriously.
"In recent years, we have commenced more investigations into capital market disclosure issues, especially where we have seen that there may be poor disclosure practices or, in some cases, where poor disclosure can mislead the market and become market abuse," it said in a statement to City A.M.
Fraud can undermine investors' faith in the markets and misallocates capital to bad companies instead of good, profitable businesses, according to Winnifrith.
"Most companies on Aim are reasonably honest. It is not good for them to have these villains getting away with it. It's not good for anyone."
Winnifrith will be attending The Global Group UK Investor Show in April where he will be holding a talk with fellow bears Lucian Miers and Matt Earl. The things he likes most about the show is the honesty of speakers.
"I've been at these shows where (fund manager) Mark Slater has said 'no, I wouldn't be buying shares. No, I feel the market is overvalued'. At too many events people are always saying 'buy, buy, buy'.
"(Entrepreneur) Nigel Wray and Mark Slater are better at investing than nearly everybody, so we can all learn from them. But they will be honest. If they feel the markets are overvalued, they will talk about it, and they will also talk about their failures. Investing is never foolproof."
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