Securities fraud can occur in a variety of ways, with some forms being more common than others. Any fraudulent activity a broker engages in with the intent to profit qualifies, and may result in felony charges. Securities fraud is usually prosecuted by the federal government as opposed to state prosecutors.
Activity that may qualify as securities fraud
Misrepresentation – Knowingly presenting a security in a way that gives it excessive future value falls under this category. This includes any attempt to manipulate a security’s value by purposely making false statements about a company’s potential.
Insider trading – While some level of insider trading is legal, many forms are not. If an individual chooses to make a trade using information that they know is not available to the public (and will significantly affect stock prices), they could find themselves facing securities fraud charges. Sharing information with another individual in an attempt to get them to make a trade qualifies as insider trading as well.
Churning – Stockbrokers are required by law to keep their clients’ best interest in mind. If a broker convinces a client to engage in a high volume of trades for the sole purpose of earning higher fees or commissions, this qualifies as securities fraud (as it is for the sole purpose of benefiting the broker, and not the client).
Examples of securities fraud
Ponzi & pyramid schemes
Perpetrators of this crime give their victims the impression that there is a legitimate, profitable business backing up investment opportunities. In reality, the only sources of funding to repay prior investors are the new investors that buy into the scheme.
High-yield investment frauds
All investment opportunities carry a certain amount of risk, and investments with the highest rate of return typically carry the highest risks. Opportunities for a high rate of return with seemingly no risk are usually a telltale sign of securities fraud. The perpetrators of securities fraud often propose “too good to be true” investment opportunities.
Penalties associated with securities fraud
Securities fraud convictions carry serious penalties for those who are convicted. Depending on the severity of the crime, perpetrators may be subjected to a fine that is anywhere from $10,000 up to $5 million. Those found guilty may also be forced to pay restitution to anyone who suffered monetary loss as a result of the crime. They may also face sentences of up to 5-years in federal prison, as well as a probation period of several years.
What to do if you have been accused of securities fraud
Due to the serious penalties associated with securities fraud, it is in the accused individual’s best interest to contact a federal criminal defense attorney immediately. When being investigated for such a serious crime, it is important to avoid making any statements to police or investigators without having legal counsel present.
If you’ve been charged with securities fraud, do not waste any time seeking legal advice. If you need a securities fraud lawyer in Las Vegas, call Gabriel L. Grasso today at (702) 868-8866.