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Securities are tradeable financial instruments that can be bought, sold, and traded, and that hold value. It is something purchased with the goal of a later profit from another person’s efforts or an outside event. They are an extensive category of investments that include stocks, bonds, notes, debentures, limited partnership interests, oil and gas interests, and investment contracts. The securities market is strictly regulated.
The definition of what can be called a security depends on the jurisdiction where the assets are being traded.
The U.S. Securities and Exchange Commission (SEC) was established under the Securities Act of 1934 to regulate and protect the securities markets to keep them safe for all investors. The SEC is an independent federal agency created to be the first federal regulator for domestic securities markets.
Anyone selling securities in the US must first register their securities with the SEC before sale and provide disclosures about those securities. Brokers, broker-dealer firms, asset managers, advisory firms, and their professional representatives are also required to register with the SEC before engaging in selling or trading securities.
Also known as investment fraud, this type of white-collar crime involves offering misrepresenting information to investors that they use to make investment decisions.
Under 18 U.S. Code § 1348, one of the primary federal statutes for securities fraud, it is illegal to intentionally devise or attempt to devise something that:
• Defrauds anyone in connection with a security that’s registered under The Securities and Exchange Act of 1934, or is required to file reports under the Act.
• Defrauds anyone about any commodity that will be delivered in the future, or with an option to buy a commodity for delivery in the future.
• Uses fraudulent or pretenses, promises, or representations to secure money or property related to purchasing or selling a commodity for delivery in the future, as well as options to buy a commodity with a future delivery, or stocks that are registered under the Securities and Exchange Act of 1934, or required to file reports under the Act.
Securities fraud is often credited to stockbrokers, speculators, or other financial investment professionals. Banks, investment banks, broker-dealers, or corporations may also be involved in this type of activity.
The most common types include:
• “Pump-and-dump” schemes involving the buying and selling of a company’s stock
• Accounting fraud
• Affinity group fraud (targeted at specific groups of people, such as churches or synagogues)
• Cryptocurrency fraud
• “High-yield” investments with allegedly high returns and “little or no risk”
• Insider trading
• Late day trading
• Market manipulation
• Misrepresentation or omission of key information
• Offering unregistered securities
• Ponzi and pyramid schemes
These are just some of the many types of securities fraud that the SEC and other agencies have discovered during investigations. Securities fraud includes both misrepresentations and omissions as well as intent to defraud.
Although the SEC’s Division of Enforcement is the primary agency tasked with securities fraud investigations and enforcement actions, it is not the only one. Other agencies that may be involved with investigations involving securities fraud include:
• Financial Industry Regulatory Authority (FINRA), a self-regulating independent organization that regulates brokers and broker-dealers, and administers training, licensing, and licensing exams, as well as securities arbitration. FINRA also has a free online tool called BrokerCheck that allows anyone to check the performance record and history of anyone in the securities industry, including the public.
• Commodity Futures Trading Commission (CFTC), another federal agency responsible for the commodities and futures market, including market oversight and enforcement.
• Department of Justice (DOJ)
• Federal Bureau of Investigation (FBI)
• Internal Revenue Service (IRS)
• Individual stock exchanges, i.e, NYSE
• Florida and other state securities divisions
• Law enforcement agencies at all levels
In many of the SEC’s Whistleblower press releases, the agency describes “related agencies” also involved in an investigation and additional enforcement actions. The SEC’s actions are primarily civil, but the agency frequently assists and cooperates with criminal investigations as well.
Note that if you are under investigation by the SEC, there is a strong possibility that other federal agencies are also involved. You may be facing additional charges by these agencies in addition to what the SEC is investigating.
Both federal and state penalties for securities fraud are harsh, and can include both civil and criminal penalties:
• Incarceration, as much as five years for a federal conviction, per charge, with some acts that include as much as 20 years.
• Financial fines, depending on the severity of the case.
• Financial restitution to victims who were harmed by the fraud, in addition to the fines.
• Disgorgement of all ill-gotten gains, as well as forfeiture of any acquired property
• Long-term probation, usually for just one count. This type of probation can last five years or longer and include regular meetings with a probation officer, drug testing, and paying all fines and restitution
• License restrictions or revocations
The penalties are based on the amount of money involved in the alleged fraud.
The SEC and other involved agencies have the burden of proof to show beyond a reasonable doubt that you did commit a crime.
Despite the seriousness of these charges, there are several defenses available:
• Lack of clear evidence, including insufficient documentation
• Coercion or entrapment by the federal government under threat of harm to you or your family
• Reliance on expert advice
• Lack of intent to deceive anyone
• Good faith belief that the deceptive statements were true
• No knowledge of the laws or regulations prohibiting their actions as illegal
• Offering substantial assistance to the SEC, other agencies, and law enforcement with the identification, arrest, and conviction of others involved.
• Statute of limitations, which is generally five years from the date the fraud was committed and two years after discovery
• Evidence obtained by unlawful and illegal search and seizure may not be admissible in court
Our experienced white-collar crime attorneys can help. When you speak with our attorneys, you will have a better idea of your options and can begin working on your defense. The sooner you begin working with us, the better chance we have of a good outcome.
Securities fraud is one of many serious white-collar crime accusations. Attorneys Adam Farkas and Jacqueline Crowley have extensive experience with securities fraud and other white-collar crimes. We can help you with your defense and seek the best possible outcome for your case. To protect your rights, contact the attorneys at Farkas & Crowley today for a free case evaluation by calling (561)-444-9529.
Looking for a criminal law firm? Farkas & Crowley, P.A. are the attorneys for you. They are extremely knowledgeable of the law and go the extra mile for their clients. Their expertise and impeccable work ethic are hard to beat. Available 24/7. Highly recommended.
-Marla Newman
500 S. Australian Ave.
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West Palm Beach, FL 33401
(561) - 444 - 9529
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The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. No content on this site may be reused in any fashion without written permission from criminal defense attorneys at Law Office of Farkas & Crowley, P.A.
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. No content on this site may be reused in any fashion without written permission from criminal defense attorneys at Law Office of Farkas & Crowley, P.A.
