Securities Fraud / Investment Fraud

The stock market has the appealing allure of being a place where you can make a fortune overnight and double it the next day. However, the reality is that most investors see only modest returns and just as many end up losing money in the stock market.

Sometimes these losses are due to poor decision making, but other times they are the result of stock fraud. Brokers can be very convincing and charismatic, especially when they are trying to sell you stocks you don’t want or need. Stock fraud is a very real problem, and no investor is immune.

As markets have grown larger, faster, and ever more complex, it has become a lot harder for average investors to protect themselves against stock fraud. It’s often a challenge to know if stock fraud has even taken place, or if risky gambles simply didn’t pay off. If any of the following scenarios sound familiar it should raise a red flag:

• Pump and Dump – Brokers who buy up a large volume of stock and then encourage smaller investors to buy it too in order to drive up the price. The brokers make huge sums while everyone else looses money.
• Off Shore Investing – Brokers who encourage investors to pump money into international companies that either don’t exist or have been heavily distorted.
• Prime Bank – Brokers who falsely claim that financial products have been endorsed or supplied by leading world banks.

This is a very limited list. Stock fraud takes many forms, and new schemes are created all the time. The key is to vet any broker/investment carefully and to always be cautious when taking risks.

Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false or misleading information, resulting in losses, in violation of securities laws. The types of misrepresentation involved include providing false information, withholding key information, and offering bad advice.

Investors are protected against fraudulent securities activities by several civil laws. The Securities Exchange Act of 1934 and Rule 10b-5 protect investors against deceptive and manipulative acts in the purchase or sale of securities. Rule 10b-5 makes it unlawful to employ a device or scheme to defraud, to make any untrue statement of material fact or omit to state a material fact not misleading, or to engage in any practice that would operate as a fraud.

Additionally, a vast majority of states have passed “blue sky” laws that regulate the securities industry and protect investors. Even if a state has not enacted specific securities laws, an investor can still pursue a claim under theories of common law fraud.

Investors can pursue claims against financial advisors or brokerage firms under the Rules of the Financial Industry Regulatory Authority (FINRA). FINRA rules require fair dealing with customers and covers a variety of improper sales practices including churning, false accounts, unauthorized trading, and misuse of customer funds.

If your investment has disappeared because of stock fraud, you may be able to recoup your losses. The first step is to contact a law firm with experience, expertise, and a track record of success in stock fraud cases. They will explore the details of the fraud, apply the principles of the law, and fight hard to secure your damages. Don’t let stock fraud put the finances of yourself and your family in jeopardy.

Don’t wait to get a free consultation. Contact the Law Office of Howard M. Rosenfield at (860) 677-4334.