Securities, or investment, fraud is a crime that involves giving investors deceptive information, which can cause financial losses and other harm to them. It can be committed by individuals, brokers, companies, and scammers.
Being on the receiving end of this type of fraud can have many harmful effects, including loss of money, trauma and stress, and a lack of trust in investment opportunities, to name a few.
Read the rest of this article to learn about the different types of securities fraud, how to identify and prevent it, and how you can prosecute the offenders.
What are the Common Types of Securities Fraud?
There are many ways in which securities fraud can occur. Some of the most common types of this fraud include:
- Sharing of information. Otherwise known as insider trading, this is when people make decisions about the company based on sharing its non-public information. It’s an illegal practice when the person involved tries to use the information to their advantage, such as at the expense of other investors.
- Accounting fraud. This is when someone manipulates the company’s financial records to benefit from it, such as hiding expenses.
- Misappropriation of assets. The offender, such as an advisor, will steal or direct cash into their own accounts.
- Ponzi schemes. Since these schemes typically involve making promises about future returns for investments that aren’t always legit, this can be an example of securities fraud.
- Manipulating the market. The offender will engage in activities to disrupt the market, such as by spreading lies about a company’s performance for their advantage.
- Cryptocurrency. There are many cryptocurrency scams that can target victims, such as the creation of fake cryptocurrencies to steal an investor’s money.
How Can You Protect Yourself From Securities Fraud?
It’s always worth second-guessing investment offers, especially if they seem to make high promises on returns. Other ways to prevent securities fraud include:
- Be aware of people who put pressure on you to make decisions. They might be trying to get you to act fast on an investment because it’s illegal.
- Improve transaction security. If there are permission changes made to your financial accounts, these should require more than one approval method to bolster their security.
- If you’re a business owner, encourage your employees to safely report misconduct.
- Have transparent policies. Everyone you work with should know what types of activities are prohibited so that there are no miscommunications.
- Keep a record of important documents. This should include all important contracts and agreements, such as pertaining to your finances and business operations.
- As an investor, research all investments before you send them your funds. You can do this by calling federal and state securities regulators to request information about the company.
- Check your accounts regularly. By staying updated on your financial records, you can spot any unauthorized transactions and report them to authorities as soon as they occur, preventing further losses.
When you’re the victim of fraud, it can be filled with many emotions, such as shame, embarrassment, anger, and worry. There are things you can do to regain control of the situation.
Gather all Documents
Collect documents and communication exchanged with the other party (such as emails) so that you can build evidence demonstrating the fraud.
Contact a Lawyer
They will be able to help you navigate the situation by filing an arbitration claim or lawsuit.
Report the Fraud
Contact the Securities and Exchange Commission (SEC) to report the fraud. The SEC is a government agency handling and enforcing federal securities laws.
Block Your Accounts
If you’ve given a scammer your personal information, such as credit card number, contact your financial institutions so they can block your accounts to prevent further fraud.
When Should You Call a Lawyer for Securities Fraud?
You should call a lawyer as soon as you discover the securities fraud.
ContractsCounsel, an online legal platform connecting clients with lawyers, has vetted, experienced lawyers on its platform. They have the expertise in dealing with various securities fraud situations.
Here’s how they can assist you through the process.
- If you contact them when you start to suspect fraud, lawyers will be able to notice all early signs of investment fraud and stop it.
- They will explain all the claims you can make against the offender and remind you of your legal rights to strengthen your position.
- They can present you in litigation, should you take the other party to court.
What Legal Solutions Can Help You with Securities Fraud?
When dealing with securities fraud, your lawyer might suggest you make an arbitration claim or seek more formal legal action, depending on the situation.
Arbitration
How this process works is that your lawyer will file a claim for arbitration on your behalf. This is a formal document that explains the case, the misconduct, and the damages you wish to receive.
Then, an arbitrator is chosen for the process. This should be a third-party, neutral arbitrator who will listen to both parties’ cases.
Your lawyer will help you gather and present evidence for the arbitration.
The arbitrator or panel will deliver a final, binding decision on the fraud, such as by stating that monetary damages need to be provided.
If arbitration isn’t successful, or your lawyer thinks it’s not suited to your specific situation, they might consider a lawsuit instead.
Lawsuit
How a lawsuit works is that you’ll present evidence, such as financial reports, and identify the fraudster (if possible) to reclaim your assets.
Your lawyer can issue an injunction, which prevents the fraudster from moving the money or assets. They will also file a lawsuit.
During legal proceedings, both parties have a chance to present their documents and evidence. A lawsuit involves hearings and motions, which your lawyer will guide you through.
Many cases of securities fraud can be resolved through negotiation, which enables parties to reach a settlement. If this can’t be reached, the parties will go to trial, which is a last resort.
Do you need a lawyer to help you with securities fraud?
Contact a lawyer on ContractsCounsel. Our lawyers are vetted, with years of experience in helping clients navigate complex and stressful securities fraud. They can guide you through all steps in a securities fraud case, from when you first suspect fraud to when you go to trial.
