NYC is the epicenter of the USA when it comes to finances. Wall Street banks in NYC are blamed by the media, and court opinion, for the crisis of 2008. New laws, regulations, restrictions, and obligations have been placed on the banking industry as a result. Violations of laws regulating banks, brokerage firms, and trading securities, can result in criminal and civil penalties. Securities and investment fraud results in federal criminal charges, in addition to the cases being among some of the most complex in the justice legal system. Those accused of committing stock broker fraud specifically, should consult with NYC stock broker fraud attorneys who can help them.
Securities Fraud Laws
There are eight different federal laws that have been passed which govern the securities industry. These regulations govern broker behavior, in addition to financial institutions, companies, and other institutions.
- Securities act of 1993 – which required public companies to provide their financial information, and other information, to investors and prohibits misrepresentation, fraud, in the sale of securities.
- Securities act of 1934 – This gives the SEC authority over the securities industry. It gives the power to oversee brokerage firms, and it controls the registration of firms that offer securities. In addition, companies with $10 million or more in assets who have 500 or more owners, have to file reports available to the public. Conduct like insider trading is prohibited by this rule. In addition, the law imposes requirements for proxy solicitations.
- Trust indenture Act of 1938 – This law requires a formal agreement between bondholders and bond issuers which conforms to the Act standards before bonds, and note are offered on sale.
- Investment Advisers Act of 1940 – This act requires all solo practitioners to confirm with regulations before advising someone about investments. The firm has to register with the SEC. Amendments to this act in 1996 and 2010 made it so only registered investment companies with $100 million or more in assets are subject to register with the SEC.
- Investment Company Act of 1940 – This regulates mutual funds, and other companies, who engage in securities trading and investing. Companies that fit this criteria must disclose their investment policies. The purpose of the act was to force companies to disclose sufficient public information on it’s fund and objectives, as well as the structure and operations of the company that the company purchases shares in.
- Sarbanes Oxley of 2002 – This mandated enhanced disclosures and created a public company accounting oversight board to force tighter controls
- Dodd Frank Act of 2010 – It established rules for transparency in corporate governance and imposed new disclosure requirements and trading restrictions.
- Jumpstart Our Business Startups Act 2012 – This was done to minimize regulatory requirements to make it easier for businesses to raise funds in the public market
Many securities fraud cases arise out of Section 10b and Rule 10b-5 of the securities act of 1934. Section 10b is the antifraud provision in the 1934 securities act. This has been used to take legal actions in cases that involve insider trading, misleading company filings, and more. Rule 10b-5 prohibits any device, scheme, or artifice, which has a purpose to defraud. Under 10b-5, liabilities can arise from omissions, or misstatements of facts which investors would believe are important in their decision to buy and sell certain stock. These are the rules which are often used by prosecutors to sue brokers, companies, and others. These regulations have been used to help investors sue brokers who were entrusted with funds and committed a breach of fiduciary duty. Our NYC stock broker fraud defense lawyers can help you fight these charges.
US Code Section 3301 defines federal securities fraud offenses that include a violation of the following codes:
- U.S. Code Section 1348.
- Section 32(a) of the 1934 Securities and Exchange Act
- Section 24 of the 1933 Securities Act
- Section 325 of the Trust Indenture Act of 1939
- Section 217 of the 1940 Investment Advisers Act
- Section 49 of the 1940 Investment Company Act
Under 18 U.S. Code Section 1348 criminal penalties are imposed for securities and commodities fraud. Under this code, you can be fined and sentenced up to 25 years in prison for knowingly committing, or attempting to commit, a scheme to defraud investors:
- If you defrauded anyone in connection with a commodity which will be delivered in the future, or on an option on a commodity which will be delivered in the future, or a security which is issued as a class of securities which are registered, or required to be registered, under the SEC Act of 1964
- If you get money, or property, in connection with the purchase/sale of commodities in the future by making misrepresentations or false statements
Section 32(a) of the Securities and Exchange Act has the following penalties:
- You make violations, false, or misleading statements, as required by the Securities and Exchange Act. Penalties can include up to 20 years incarceration, and a fine up to $5,000,000. If it is a brokerage firm or financial institution which violated the law, the fines can be up to $25,000,000
- Failure to file documents, and reports can result in a forfeiture of $100 per day each day not filed.
- Violations by officers, stockholders, directores, employees can result in fines and civil penalties ranging from $10,000 to $2,000,000
Section 24 of the 1933 Securities act imposes up to 5 years in jail, and fines up to $10,000 or more for making false statements on required registration statements and for other violations of the rules and regulations.
Section 325 of the trust indenture act imposes penalties that include up to 5 years in jail, and fines up to $10,000 for bond issuers.
Section 217 of the Investment Advisors Act imposes penalties of up to 5 years incarceration and fines up to $10,000 for violations of the Act Rules and Act regulations. Section 49 of the Investment Company Act establishes the same penalty for certain violations of rules and regulations when it comes to mutual funds and other organizations who are selling their own securities to investors.
NYC Stock Broker Fraud Lawyers
Raiser & Kenniff, PC, has helped financial institutions, investment advisors, stock brokers, and other clients who are accused of securities fraud offenses. Our New York stock broker fraud attorneys know fraud laws, and can help with all forms of investigations into fraudulent behavior.