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Securities Fraud

Securities fraud is an act committed by an entity intending to manipulate the market through deliberate concealment, or distortion of information. The SEC (Securities and Exchange Commission) acts to regulate against securities fraud by enforcing investment acts and laws.

Securities fraud may be committed by:

Brokers-dealers (misleading clients or advising based on inside information)
Financial advisors or analysts (purposefully offering poor advice or inside information)
Corporations (hiding or distorting information)
Private investors (acting on inside information)
The SEC
The SEC was established in 1934 following the advent of extended federal checks on investment markets. Since then the focus of the SEC has been to increase investor confidence by making information on companies and securities publicly accessible. The SEC monitors the securities market and investigates unusual market activity. The SEC was initially designed to enforce the Securities Act of 1933 and the Securities Exchange Act of 1934. Both acts were built on the following principles:

Companies offering investment opportunities must be open and forthcoming about the status of their business and the stocks they are offering. This way the investor has the opportunity to judge the information and assess the potential investment risks versus gains.
Persons who sell or exchange securities must perform their business honestly and with fairness. Because a broker-investor relationship involves trust on the part of the investor, the broker (or dealer, or company, as the case may be) must provide reliable information to his customer.
Forms of securities fraud

The most common forms of securities fraud that the SEC regulates against are:

Insider trading (trading based on information that is not available to the public)

Accounting fraud (keeping inaccurate books or presenting false information purposefully)

Misrepresentation (presenting misleading or untrue information about a company, or its securities, to an investor or the public)

Corporate/shareholder fraud

Corporate fraud or shareholder fraud occurs when a corporation conceals information or misrepresents itself before the public. Because corporations are designed to function as entities of their own, directors have a lower level of personal responsibility for the outcome of business decisions than they would if they were direct owners. In addition, corporation directors operate under limited liability. Under limited liability, the partner or investor takes no loss greater than the amount he has invested in the business. The partners and shareholders are not personally responsible for company debts. The liability for corporation failure or debt, because of the dissemination of responsibility and ownership, is harder to pinpoint than it would be under a sole proprietorship or a limited partnership.

Investment/brokerage fraud

Investment and brokerage houses commit fraud when they offer false or deceptive information to their investors in an effort to manipulate the market. The SEC has set business standards for broker-dealers to follow in order to advise investors well, and handle the flow of inside information fairly.

Course of action

Normally, cases of security and corporate fraud will be addressed in a federal district court. Brokerage fraud disputes are usually handled by the NASD or other dispute resolution organizations. The NASD (National Association of Securities Dealers) regulates its members and may remove them from the association if their actions are found to be fraudulent by NASD or SEC standards. In either situation, a qualified securities fraud attorney can best present the case of the defendant before the court.

Find a Securities Fraud Lawyer in Any State:
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Link: http://www.securitiesfraudfyi.com/index.html