About the Crime of Securities Fraud

When someone commits fraud related to the sale, purchase or trade of a security — stocks, bonds, investments, etc. — this is known as securities fraud. The federal government prosecutes securities fraud under two statutes — the Securities Act of 1933 and the Securities Exchange Act of 1934 — as well as a number of related laws and regulations.

Each state also has laws against securities fraud as well as a state securities commission. This means that securities fraud crimes can be prosecuted at both the state and federal levels.

To successfully prosecute a securities fraud case, a prosecutor only needs to prove that there was an intent to benefit or profit from the activity. If an individual engages in a fraudulent activity with the intent to profit or benefit, this is all that is needed to have committed the crime of securities fraud.

Some of the most common forms of securities fraud include:

Misrepresentation — if someone knowingly tries to manipulate the value of a security through deceptive or false information in order to make a profit, he or she has committed securities fraud.

Insider trading — if someone associated with a company knows information that is not available to the public and tries to make a profit by buying or selling that company’s stock based on that information, this is insider trading. If that same person tells another person about the information, and that second person tries to make a profit in the same manner, this is also insider trading. However, some forms of insider trading are legal, including when a person in a company buys or sells the company’s stock and reports that activity to securities regulators.

Churning — stockbrokers are fiduciaries who have a duty to act in their clients’ best interests. If a broker convinces his or her clients to make excessive trades in order to generate more fees for the brokerage, this is churning and considered a form of securities fraud.

Securities fraud is punishable by civil penalties and criminal penalties, including prison, fines, restitution and probation. Since this crime is typically complex and can carry life-altering penalties for a conviction, anyone accused of participating in securities fraud needs the expertise of an experienced white collar criminal attorney.

The Cogdell Law Firm is a full service criminal litigation and appellate law firm. We provide client-focused representation at all stages of the process, whether our clients are seeking to avoid charges, have been charged, or are seeking reversal of a conviction on appeal. When results matter most, contact Dan Cogdell at (713) 426-2244 or dan@cogdell-law.com.