Securities fraud is both a civil infraction and a federal crime – it’s up to how the SEC brings the case following an investigation. The punishments can be very steep for white-collar crimes. Penalties range from fines, license restriction or loss to probation or incarceration. Even accusations of fraud can have an impact on securities sellers. Stechschulte Nell Law shares what constitutes securities fraud and details possible defense strategies.
What Counts as Securities Fraud?
Securities are investments such as stocks, bonds, mutual funds, real estate funds, bank notes, and other financial instruments. Most people and entities invest in securities based on research and information they can gather about a particular security. If that data has been manipulated to deceive an investor, and the investor is harmed, that constitutes securities fraud.
Although charged with securities fraud, that doesn’t mean immediate guilt in the eyes of the law. At trial, we can argue your minimal role for a significant sentence reduction. We understand a momentary lapse in judgment and our top-rated attorney can help defend your fraud charges.
Securities Fraud Defense
Defending those accused of securities fraud at either a federal or state level is a highly specialized area of law.
A Hypothetical Defense…
A client may be aware of passing insider information to others on the stock market for financial gain. However, they didn’t act on the information. Therefore, they shouldn’t be charged with securities fraud.
It is critical to enlist a defense attorney who knows the ins and outs of this complex legal arena. Our experienced trial attorney will help present your best defense.
Common Types of Securities Fraud and Penalties
Misrepresentation, churning, and insider trading are among the most common types of securities fraud.
Misrepresentation
Occurs when deceptive statements are made regarding the value of a security. If you were to misrepresent a security’s true value in order to profit from others purchasing it, you have committed fraud.
The Wolf of Wall Street, Jordan Belfort, had the manipulation of stocks down to a science by creating demand for stocks and then controlling the supply. This is what’s known as a “pump and dump” scheme, and he was subsequently charged with securities fraud (as well as money laundering).
Churning
Is when a broker excessively trades a client’s securities to profit from the fees charged in commissions. Because a broker’s duty is to operate in a client’s best interest, this legally constitutes fraud. If these fees go into your pocket to pay personal or business expenses, you expand your legal risk.
Insider trading
Is the most well-known type of securities fraud. It happens when someone inside a company uses confidential information not available to the public to purchase and profit from the sale of securities. Martha Stewart served time in Federal prison for this type of fraud.
The SEC (Securities and Exchange Commission) will investigate all allegations of fraud. Whether the Commission decides to bring a case in federal court or within the SEC before an administrative law judge may depend upon various factors. If your case is sent to federal court, fines of $10,000 up to $5 million are possible. A conviction for securities fraud can mean spending years in federal prison.
When Charged with Securities Fraud
First, speak to no one. Second, call a securities fraud attorney. At Stechschulte Nell, we are experienced in representing those accused of securities fraud. Securities fraud defense is one of the specialties of our federal criminal law firm.
It is not necessary that the defendant made a profit or that shareholders suffered a loss. To be convicted of securities fraud the government must prove beyond a reasonable doubt each of the following:
- That a defendant used a device or scheme to defraud someone, made an untrue statement of a material fact, or failed to disclose a material fact which resulted in making the defendant’s statements misleading.
- That a defendant’s acts or failure to disclose information was in connection with the purchase or sale of securities (stock, bond, notes).
- That a defendant used the mail or the telephone in connection with these acts.
- That a defendant acted for the purpose of defrauding buyers or sellers of securities.
Stechschulte Nell will ensure that your circumstances are clearly presented at trial. It is our goal to help you maintain your freedom and recover your financial reputation, if possible. We may argue that you weren’t aware that the statement or representation was untrue. A defense attorney may also argue that although involved, you’ve since done your best to make things right. These efforts are generally seen favorably at sentencing.
Securities Fraud Attorney
The punishments are potentially severe for white-collar crimes like securities fraud. If convicted, you may have to pay fines and restitution and you may be facing significant jail time. Those in the financial industry generally lose the ability to work in the industry again.
Contact us for a consultation or free case review to learn how our Florida securities fraud defense attorneys can help.
