Last Updated on: 23rd May 2023, 11:38 am

The Dangers of Securities Fraud: Understanding the Legal Consequences

Securities fraud constitutes a severe breach of trust within the financial and investment industry. Criminals perpetrate these actions to deceive and manipulate investors, regulators, and the general public, ultimately undermining the integrity and fairness of securities markets. In both New Jersey and federal law, actions such as misrepresentation, market manipulation, omission, and insider trading could lead to several years in prison and substantial fines.

Categories of Securities Fraud:

Misrepresentations
Securities fraud frequently manifests as deliberate and flagrant misrepresentations during initial public offerings (IPOs) or sales. Unscrupulous brokers, companies, and individuals involved in raising capital from unsuspecting investors hatch schemes to deceive them in the following ways:

• Presenting a non-existent or misrepresented company, leaving victims investing in thin air
• Manipulating the availability and quantity of shares or securities
• Cooking up false business activities, opportunities, and prospects
• Obscuring the identity and value of assets
• Falsifying company management’s academic, employment, and professional backgrounds

New Jersey securities fraud lawyers also represent brokers accused of fraud on exchange markets. Misrepresentation in these secondary securities markets stems from fabrications concerning trading price, profitability, company values, favorable court case outcomes, business opportunities, management changes, or the supply and demand of securities under scrutiny.

Prosecutors search for fraudulent statements in a company’s prospectus, a legal document outlining the company or assets under consideration for purchase or acquisition. Falsified oral, written, or digitally transmitted misrepresentations can lead to prosecution.

Omissions
Sometimes, what you don’t say can be just as damaging as what you do. Remaining silent about a crucial piece of information – rendering another statement false or violating a statute or regulation – can land you in hot water for securities fraud. Failure to disclose updated information that makes a previous statement untrue may result in prosecutors accusing you of acting under false pretenses.

Market Manipulation
Federal and New Jersey statutes explicitly prohibit schemes designed to artificially influence the price of securities. Market manipulation can involve a single individual or a group of conspirators, employing multiple identities or entities (including fake ones), to buy small amounts of security and create the illusion of increased demand, thus pushing the price upward. Press releases and public announcements of these bogus purchases further perpetrate the deception.

Insider Trading
Insider trading—a well-known type of securities fraud—typically involves officers, directors, or employees of companies who buy or sell shares based on confidential information unavailable to the public. Examples of such privileged data include government decisions, plans for company mergers or acquisitions, confidential research on products under development, and undisclosed financial conditions.

Criminal liability for insider trading can also extend to those who “tip” others on inside information, those in fiduciary positions, such as attorneys, accountants, and brokers, and government employees or officials involved in trading or otherwise handling non-public information.

Defending Securities Fraud Prosecutions

Facing allegations of securities fraud often means defending yourself in multiple legal forums. Criminal prosecutions commonly begin as investigations or inquiries by the Securities and Exchange Commission, state securities law enforcement agencies, or as a result of civil suits by harmed or disgruntled investors.

These civil actions can place defendant(s) in a precarious legal position where they do not have the Fifth Amendment protection against self-incrimination. Refusal to testify, answer interrogatories, or produce documents could lead to plaintiffs having their allegations treated as true.

Securing the representation of a seasoned New Jersey securities fraud and securities offenses lawyer is vital. Your legal counsel will assist in navigating subpoenas, discovery requests, determining a solid defense strategy, and proving good faith in your opinions and actions, ultimately aiming to prevent or mitigate any legal repercussions you might face.