People who invest money hope to see a decent return, as many rely on their portfolios for wealth-building or retirement planning. California investors could find themselves in a challenging position after suffering financial losses because of securities fraud. Those committing such illegal actions may face a prison sentence and heavy fines.
Securities fraud explained
Any attempt to manipulate the financial markets or an investment vehicle falls under the category of securities fraud. The same applies to actions that involve lying to investors or misrepresenting facts. A broker who falsely claims an investor’s money is in a particular stock when it is not could be guilty of securities fraud. Someone who claims a failing company is profitable in an attempt to secure more investment capital may also face fraud charges.
Securities fraud could take numerous forms, with pump-and-dump schemes and insider trading representing two of the more common ones. Pump-and-dump strategies involve traders pushing up the value of a stock to sell their shares at manipulated profits. Unfortunately, other investors could lose money once the overvalued stock drops in price. Insider trading involves someone using illegally acquired privileged information to buy and sell stocks violating federal laws and regulations.
Securities fraud charges
As with many white-collar crimes, securities fraud involves intentional deception. Prosecutors must prove intent to procure a conviction on securities fraud charges. Mistakes and errors may leave someone facing civil claims, but that is not the same as prison time for intentional fraud.
Anyone suspected of securities fraud may face a federal investigation. Those answering questions that investigators pose might not realize they can invoke their right to remain silent. Failing to do so could result in making self-incriminating statements. Those facing an indictment may fight the charges with an effective defense strategy.