Insight Into Securities Fraud Accusations
Securities are defined as any kind of investible financial entity, including bonds, stocks, bank notes, derivatives, options, and others. Securities fraud occurs when someone is involved with a financial instrument but steals, cheats, or lies to get money from someone else. The most common examples of securities fraud are:
- Insider Trading: Security trading based on information about the company that is not accessible to the public.
- Ponzi Schemes: Selling equity stakes to investors in a company that doesn’t exist, and funding returns for early investors using funds from future investors.
- Boiler Rooms: Using deceptive and high-pressure sales strategies to sell penny stocks, or other investments of low value.
- Dummy Corporations: Establishing a fake company and selling equity stakes to investors that are non-existent.
- Short and Distort (or Pump and Dump): Being in a position of security and then spreading information that is deceptive through chat, blogs, or email in order to influence others to follow suit. As price changes, the fraudulent individual closes the position at a profit.
Brokers must be wary to avoid suspicion of securities fraud, including situations like:
- Unsuitability: Not being honest to investors about investment risks, or making investments that are not proper for the client’s needs.
- Churning: purchasing or selling securities to obtain excess commission.
- Illegal Accounts: Making a fake account or putting a client’s funds into their own account.
- Unapproved Trades: Trading without the client’s permission to do so, unless allowed explicitly in a written agreement.
- Over-Concentration: Placing most of a client’s funds in a single investment.
If you have been accused of securities fraud, then you must get legal protection immediately. Oftentimes, federal investigations occur in secrecy, since it’s easier for evidence to be collected if the suspect of their case doesn’t understand that they are being investigated. So with that, it is recommended that you contact a securities fraud lawyer in San Francisco, CA from The Morales Law Firm now for a consultation.