Regulations regarding securities are complex, and they impact all parties who participate in trading activities. This includes private investors, company insiders, securities brokers and more. If you have been targeted in a securities fraud investigation by the Securities Exchange Commission or by other law enforcement agencies, you may face serious charges with harsh penalties upon conviction. The nature of securities fraud is easy to understand. However, the complexities of securities regulations and laws must be taken into account when hiring a defense lawyer for your case. It is generally most advantageous to hire a skilled defense attorney with a specialization in securities fraud cases.
Understanding Securities Fraud
When someone falsely states information about the value of a company’s stock or about other aspects of the company that could influence valuation or investment decisions, they are participating in securities fraud. Keep in mind that an important nuance of securities fraud is that other people or entities must take financial actions that are based specifically on that false information.
There are three primary types of securities fraud. One of these is when the company itself does not accurately represent important information about profits or other factors to its shareholders. Often, this is done to encourage others to invest in a struggling company with the belief that the company is actually healthy.
The second type of securities fraud is insider trading. This occurs when a company’s confidential information is leaked to others, and those people make financial decisions based on early access to the information. This may also include when insiders in the company buy or sell the stock with the anticipation of stock movement after an announcement is to be made in the near future.
The third type of securities fraud is misrepresentation. This occurs when an investor or third party invests in a large amount of a relatively unknown stock and disperses false information about that company to drive the stock price higher. The original investor then sells his or her shares for financial gain.
Penalties for a Securities Fraud Conviction
If you are convicted of securities fraud, your offense will be classified based on the guidelines in the United States Sentencing Commission Guidelines Manual. Depending on the scoring of the crime under this manual, the minimum penalty would range from probation or imprisonment up to 33 months. However, aggravating circumstances are often taken into account, so probation is rarely the outcome. The maximum penalty is 20 years in prison with supervised release for up to three years afterward. Up to $5 million in fines could also be issued, and this is in addition to the required return of all profits that the individual gained through his or her illegal activities.
Defense Strategies in a Securities Fraud Case
The defense against securities fraud charges begins during the investigation and pre-trial stages. Because of the range of defense strategies that could be used in these early stages, it is important to get your securities fraud defense lawyer involved in the case as soon as possible. Before and during the trial, your attorney could argue that you acted in good faith. This means that you had no reason to believe that the misinformation that was used or spread was false.
Generally, ignorance of the law cannot be used as a defense, but there is a “No Knowledge” clause in the Securities Exchange Act of 1934. This clause states that an individual cannot be imprisoned if he or she did not know that their act was criminal. However, the burden of proof for this defense lies on the defendant.
Another tactic that your lawyer may use is substantial assistance. This will not return a not-guilty outcome, but it can result in a far more lenient sentence. Through this tactic, the defendant agrees to share crucial information that could lead to charges made against other parties.
A final defense strategy that is commonly used in securities fraud cases is illegal search and seizure. Often, this strategy is used to show that crucial information gathered during a search was collected unlawfully because it was outside the scope of the warrant. In this case, the information may be ruled inadmissible. As a result, the prosecutor’s case is weakened or even nullified.
Schedule an Initial Legal Consultation Today
A securities fraud case can have far-reaching implications that affect you for the rest of your life. While the prosecutor may have a solid case against you, a successful defense can counter the arguments made by the prosecutor. With this in mind, your next step should be to find an experienced attorney with deep knowledge of securities fraud law. Email or call our law firm today to request an initial consultation with us.
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