What Is Securities Fraud?

 Posted on April 25, 2019 in White Collar Crime

There are many types of fraud that are classified as federal offenses. Many of these types of fraud are self-explanatory. Mail fraud indicates fraud that used the U.S. Postal Service to carry out the act. Wire fraud uses electronics such as email or the Internet to commit fraud. Securities fraud sometimes has people questioning what it really means, particularly if they’ve been accused of it. So, what is securities fraud? Perhaps more importantly, if you’ve been charged, what penalties are you facing? Security Fraud Defined The term “security” is a broad term that refers to a number of different investments. Municipal bonds, corporate stocks, bank notes, and investment contracts are all considered securities. Therefore, securities fraud occurs when one person lies, cheats, steals, or deceits someone for financial gain involving a security. Securities fraud is generally considered a white-collar crime. Although there are federal laws on the topic, states also have their own statutes pertaining to securities fraud. Most cases, however, are tried as a federal crime. The two main federal statutes involved in a securities fraud case are the Securities Act of 1933 and the Securities Exchange Act of 1934. Types of Securities Fraud Securities fraud can occur in a number of ways. Some ways though, are more common than others. The most common types are:

• Misrepresentations. Securities depend on someone’s ability to predict how a security will perform in the future. When someone lies or makes false statements about how a security will perform, it is often considered securities fraud. For example, if a stockbroker made a commercial claiming that a stock was going to perform very well when they didn’t know that as fact, just to increase the sale of that stock, it is considered securities fraud.
• Insider Trading. Insider trading is the opposite of misrepresentations. When a person is associated with a company involved in securities, such as one that is on the stock market, leaks insider information that isn’t available to the public, this is considered insider trading. If the information is not publicly available, those in the company are not allowed to release that information. Those in a company are not legally allowed to release confidential information that could affect the securities related to that company.
• Churning. The act of churning involves pressuring one person to invest an excessive amount of money into one security, for the sole purpose of the broker making more money off fees and commissions. This is also securities fraud.

Penalties for Securities Fraud In the United States, securities fraud is taken very seriously. A conviction may result in a maximum of five years in a federal prison or fines between $10,000 and $5 million. In addition, most convictions will include a sentence that the defendant must pay restitution to any victim including investors, employees, and clients. In addition to this, victims of securities fraud may also file a civil lawsuit against the defendant. While a sentence during a criminal trial may require that restitution is paid, this is typically only for the amount defrauded. A civil lawsuit can provide for other damages, as well. Have You Been Charged with Federal Fraud? Contact an Illinois Federal Criminal Defense Attorney

Any type of federal crime is extremely serious. Anyone convicted needs the help of a skilled Chicago federal criminal defense attorney. If you have been charged with securities fraud or any other federal crime, contact the Law Offices of Hal M. Garfinkel at 312-629-0669. We will fight for your rights and help you build a solid defense so you have a better chance of retaining your freedom. Call us today or fill out our online form for your free consultation.

Sources:

http://legcounsel.house.gov/Comps/Securities%20Act%20Of%201933.pdf