There are several ways that securities fraud can take place.
Insider trading occurs when someone with confidential information about the company’s finances uses that information to their advantage. In the case of positive but unreleased news, they may choose to buy cheap shares in the company. If they know bad news is coming, they may choose to sell some or all of their current stake.
Company level misrepresentation takes place when an officer or director of a company does not accurately report financial information to shareholders. Information that is disclosed may be used to artificially raise the worth of the company’s stock. This could leave shareholders owning overly inflated shares and could cause them to lose substantial portions of their investment.
Third party misrepresentation takes place when an outside party puts out false or misleading information about a company to either drive the price up or artificially drive the price down so that cheaper shares can be purchased. Sometimes known as “pump and dump” schemes, a person may find a small and unknown company, buy large quantities of shares, put out misleading information to drive the price up, and then sell the shares at a big profit.
Defense strategies if you are charged with securities fraud
An attorney has strategic defense options for clients who are charged with securities fraud. How these are employed will depend on the facts of each case. Because securities fraud can involve complex legal statutes, finding a highly experienced attorney is a must in this kind of case.
If you are accused of securities fraud, you must cooperate with the SEC or run the risk of losing your job. However, by giving testimony to the SEC, you run the risk of helping their investigation against you which could lead to a federal indictment and ultimately a conviction that could land you in prison for a long time.
Deciding how to best cooperate with an investigation must be considered carefully, protecting yourself from making your personal situation worse. This makes working closely with an attorney who has experience in dealing with these types of situations your best strategy for minimizing a negative outcome against you.
The Law Office of Ginger Kelley serves clients in Newport Beach, Santa Ana and communities throughout Orange County, California.