Understanding Securities Fraud

New Yorkers work hard for their money. Often, in an effort to provide a better life for their family, these hard-working people use money that they have saved to invest. Families plan on investment returns to pay for children’s college funds, necessary home repairs, much deserved family vacations, retirement purposes, rainy day funds, and a variety of other comprehensive financial planning reasons. Sometimes, families choose to make investments that are unnecessarily risky based on false information provided to them from investment professionals that prey on these hard-working individuals in an effort to increase their own personal gain. When investment professionals use fraudulent information to convince clients to invest their hard-earned money, those investment professionals have committed the very serious and harmful crime of securities fraud.

What exactly is securities fraud?

Securities fraud covers almost all fraudulent practices in the stock trading or commodities market that convinces investors to make financial decisions about these types of investments based on false or misleading information. Not only are there federal regulations that govern the securities industry, including stock trading and other forms of investment, but New York has its own set of laws dealing with securities fraud, one of which can be found here.

An example of false or misleading information that could convince someone to invest in a security might be an investment broker that represents and investment opportunity as safe without much risk of failure. The investment broker may stand to make a great deal of money from the success of such client investments. However, if the investment broker is fully aware of the volatility of the investment in question and still represents it as a sound, secure investment opportunity, the investment broker may have committed securities fraud. In this scenario, the investment broker hasn’t really lost anything, but the investor may have lost what amounted to his or her life savings.

Another common example of securities fraud is when an investment broker makes a standard commission on the purchase or sale of stock and convinces a person to invest in a particular stock with the assurance that the stock in question has performed well over a long period of time. Often times, these stocks may have underperformed for a long period of time. Even worse, the parent company’s financial status might be very precarious and on the verge of collapse. A broker would be knowledgeable of this fact, but may mislead investors into thinking the company was doing just fine by generating dazzling, but false, statistics related to the parent company’s financial health. The broker still makes the standard commission on trading, but does so knowing full well the investments taken are doomed.

Similarly, the broker may create misleading information that grossly overestimates the earnings potential of a stock, when in fact this stock has little to no potential for growth. Promising that this stock is the “next big thing” based on purported financial research that often involves purposely confusing and false information can lead to investors clamoring for a chance to invest in an opportunity that is fated to fail.

What can you do if you have been accused of securities fraud?

Individual investors are expected to understand the risk of investing. The stock market is unpredictable. Future prices can rise and fall on a whim. Certainly there is an aspect of personal responsibility that accompanies the choice to invest, especially when large sums of money are involved. However, investment professionals can themselves fall victim to poor record-keeping, unscrupulous business advice, insider tips, and other occurrences that result in charges for securities fraud. If you are facing these very serious charges, it is important that you have an experienced criminal defense team at your side to make sure your rights are protected. If you are facing charges related to securities fraud, identity theft, falsifying business records, or other white collar crimes, contact Anelli Xavier’s criminal defense team to schedule a consultation and find out more about the charges and the related judicial process, as well as what options might be available to you.

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