Securities fraud encompasses a variety of illegal acts that take place in the securities industry, ranging from stockbroker schemes to insider trading to corporate misstatement of financial information to conceal earnings or debt. Securities fraud falls under the general category of crime called white collar crime. White collar crime is defined as unlawful activity that takes place in a professional or business setting in order to achieve financial benefit at the expense of another.
Securities fraud is an act or omission carried out by one party to manipulate the market through concealment or distortion of information. Securities fraud may be carried out by one securities professional (i.e. dealer, broker, financial advisor, or analyst), it may be committed by a financial corporation, or it may be perpetrated by a private investor. Securities fraud can involve the use of inside information not available to the public in order to accrue benefit or unfair advantage. Securities fraud can also involve accounting fraud or misrepresentation of the facts. This can include presenting false information, fraudulent record keeping or otherwise hiding or distorting a securities company's financial information or activity. Securities fraud laws state that securities companies must present accurate and complete information to the public about their financial activity.
Securities fraud may also target consumers with a financial investment in the securities industry. Securities brokers, dealers, financial advisors, and analysts are trusted by their clients to present full and honest information regarding their financial status and options. These securities professionals have a fiduciary duty to their investors and stock holders and must act in good faith and fair dealings in all professional transactions. Securities fraud is not only a breech of this fiduciary responsibility; it is also a criminal offense.
There are several ways that a securities professional can commit securities fraud which harms their client. Churning is the excessive and unnecessary trading of stocks in order to obtain higher commissions from a client's account. A broker may make unsuitable or unfavorable investment decisions that benefit himself or the company at the expense of the client. A broker may fail to diversify a client's investment portfolio, posing a significantly greater risk of loss to the client. A broker may also commit securities fraud by misrepresenting investment or trade facts, misappropriating a client's financial investment, or failing to follow client instructions.
The Securities Exchange Commission (SEC), established in 1934, is the federal agency responsible for investigating cases of securities fraud. When an individual or organization commits securities fraud, they can face serious civil and criminal penalties. The victim of securities fraud has the legal right to seek restitution for their losses. The federal government and most states consider securities fraud a felony offense. If a suspect is convicted of securities fraud, they can face incarceration, heavy financial fines, and much more. If you are involved in a securities fraud case, please contact us to confer with a qualified and experienced attorney who can evaluate your case to determine how best to protect and maximize your legal rights.
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