California Securities Fraud Lawyer

Do I Need To Hire A Security Fraud Attorney?

You should never delay contacting a qualified criminal defense law firm or you are accused of investment fraud or securities fraud. It’s critical to your freedom to choose a law firm that gets results, a firm with a history of getting dismissals, reduced charges, and deferred sentencing. My Rights Law is that firm. You know you’re in good hands with us, and we promise to fight diligently on your behalf. Don’t continue to sleep on your rights; schedule your free initial consultation with a financial crimes lawyer call us at (888) 702-8882 by leave us a message on our secure web form.

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Securities Fraud As A State Crime

Section 25401 of California’s Corporation Code governs securities fraud. This section states that it is a crime to use false statements–whether written or oral—to sell, offer to sell, buy, or offer to buy a security. You can neither lie about nor hide a material fact under this statute.

A “material fact” is a fact that the victim relies on when deciding.[1] For example, suppose you told a client that the interest on the credit you extend to them is the lowest of any agency and only 15%. However, you know that your agency doesn’t offer the lowest interest rate on credit and that 15% is three times the amount of most other agencies in town. The statement was a material fact if the client chose to get credit from you based on your lie.

Security is a guarantee to make good on a debt. Essentially, it is collateral. Some people put up their homes as collateral. Security is also a document people use as proof of credit, bond, or stock ownership. Additionally, securities are tradable financial assets people use to grow their capital in private and public sectors. Therefore, securities fraud can often involve the following:

  • Projection of unrealistic returns
  • Pump-and-dump schemes
  • Ponzi schemes
  • Failure to disclose material facts
  • Failure to disclose risks
  • Churning an account
  • Misrepresentation
  • Concentration in one stock or industry
  • Unsuitable investments
  • Using proceeds for undisclosed purposes
  • Pyramid schemes
  • Late-day trading

Penalties

Due to the severity of security fraud charges, punishment for these crimes can be very harsh. If convicted, you could face imprisonment, fines, or both.[2] Fines for security fraud can be as high as $10,000,000 and sometimes $25,000,000.[3] Prison sentences range from two to five years.

Other consequences include but are not limited to:

  • Loss of employment
  • Loss of certain licenses or certifications
  • Difficulty in finding employment post-incarceration
  • Missed time with your loved ones
  • Social isolation
  • The stigma surrounding your criminal record

Defenses

Securities fraud is a “general intent” crime. This means that prosecutors must prove beyond a reasonable doubt that you intended to break the law.[4] Yet, prosecutors don’t need to prove that you intended for a specific result to occur.[5] Thus, the state may bring other charges against you should more egregious outcomes occur. Fortunately, there are defenses applicable to most cases.

False Allegation

Suppose that the police question your friend. Your friend names you as the perpetrator during interrogation. Unbeknownst to you, your friend had used your name, signature, and handwriting to commit this offense. You only find out about this once the police arrest you. In this case, you’ll argue that you’re being falsely accused. However, proving that your friend set you up may be complicated and tedious.

Entrapment

Entrapment occurs when a government agent masterminds a crime and applies overwhelming pressure to get you to commit it.[6] To use this defense, you must show that the agent induced the crime and, but for this inducement, you would’ve never committed it.[7]

No Intent

More often than we think, someone masterminds a crime and gets an unsuspecting person to do it. So, suppose you’re an intern, and your supervisor purposely gave you false information to give to her clients that you didn’t know was false. Instead, you reasonably believed what she told you because of her superior status and the paperwork she gave you seemed to be checked out. Essentially, you were following orders. Under these circumstances, there is a good chance a jury may not find you guilty.

Honest Mistake

Let’s say you omitted a material fact, but you didn’t see it as material. Your client neither asked about it nor mentioned it. It also wasn’t something that was often of consequence to previous clients. Under these circumstances, you may argue that you didn’t knowingly omit an important detail.

Or perhaps you misquoted significant details to a client they relied on. You only discovered your huge blunder after your deal went through. But as soon as you learned of your errors, you contacted your client and manager, trying to correct the matter. Although you may incur some civil penalties, your actions to correct your error can work to show that you didn’t have criminal intentions to deceive knowingly. This defense is also known as good faith belief.

Securities Fraud As A Federal Crime

18 U.S. Code § 1348 prohibits you from knowingly attempting to defraud or scheme against someone in connection with:

An example is pump-and-dump schemes. Suppose you and others use Facebook and TikTok to “pump up” share prices by getting people to believe you’re promoting great stock deals. You might create fake web pages that report fake information about how well the stocks will do or how well-known brands have invested in a particular company’s stocks. However, these are terrible stocks in which you and your cohorts bought an interest. After pumping up the price, you all made $500,000 each. Then, you dumped the stocks, and your victims saw no return.

Penalties

Any federal offense is serious, and securities fraud is no different. A conviction of this offense may land you in federal prison for a maximum of twenty-five years.

Remember that securities fraud is a general intent crime, which means the attorney general does not need to prove you wanted the result to happen. Suppose one of your victims commits suicide. Even though you probably didn’t mean for that to happen, the surviving family may bring a civil suit against you. In civil suits, victims sue for monetary damages. These damages are divided into compensatory damages and punitive damages. Paying for the physical and emotional injuries that you caused the family falls under compensatory damages. Paying for your grossly reckless or wanton actions is further punishment that falls under punitive damages.

The federal government also pursues securities fraud cases on a civil or regulatory level. Securities and Exchange Commission, for example, often brings enforcement actions against financial advisors and unregistered investment advisors for fraud, breach of fiduciary duty, and other acts violating Securities and Exchange Act of 1934, Securities Act of 1933, and Investment Advisers Act of 1940.

Financial Industry Regulatory Authority (FINRA) also pursues regulatory actions against FINRA-member brokerage firms and securities brokers for fraud. Consequences could include fines, restitution, loss of professional licenses, and other collateral consequences. For example, a financial advisor could be barred by SEC and ordered to pay fines to a victim of fraud. FINRA could bar a broker from associating with a brokerage firm.

Defenses

There are a few defenses that attorneys commonly use to raise reasonable doubt for this crime. However, the best defenses come from detailed consultations with a strategic law firm. Here at My Rights Law, we devote ourselves to conducting a thorough investigation to fight aggressively for you. Call us at (888) 702-8882 or reach us by filling out our secure web form.

Statute Of Limitations

Most crimes, including federal crimes, have an expiration date by which prosecutors must file charges. This expiration date is known as the statute of limitations. Once this date passes, the law bans prosecutors from pursuing charges against you unless an exception applies. In this case, there is a six-year deadline by which the attorney general must indict you.[8]

Fourth Amendment Violation

Generally, the police need a warrant to search your property. This Constitutional right applies to your personal computer, cell phone, and vehicle, in addition to your home. Without a warrant or exigent circumstance, a judge must rule as inadmissible any evidence the police seize.

Contact Criminal Defense Investment Fraud Lawyers

If you have been charged with security fraud, you must secure a reliable and skilled defense. At My Rights Law securities fraud lawyers have represented numerous criminal defendants, including investment advisors. Our California investment fraud attorneys fully understand how securities fraud cases unfold and use our knowledge to shield our clients and preserve their best interests. Contact us through our secure web form today or call (888) 702-8882 to schedule a free consultation.

Other financial crimes we defend include: Mortgage Fraud, Worker’s Compensation Fraud

FOOTNOTES
[1] See Cambridge Dictionary – Material Fact
[2] See Corporations Code 25540(a)
[3] See the footnote above
[4] See General Intent
[5] See the footnote above
[6] See 645. Entrapment – Elements
[7] See Mathews v. United States, 485 U.S. 58, 63 (1988)
[8] See 18 U.S. Code § 3301(b)