Securities Fraud and Securities Offenses
Both New Jersey and federal law prohibit acts of securities fraud to protect the integrity and fairness of the securities markets. Whether you’re trading or dealing in stocks, bonds, mutual funds, interests in companies or other securities, your statements and trading activities may catch the scrutiny of regulators, investors and even prosecutors. Punishments include several years in jail and significant fines. Below, we profile common categories of securities fraud.
Misrepresentations
Securities fraud often takes the form of intentional misrepresentations during initial public offerings or sales. Brokers, companies and others involved in raising capital from investors may lie during an initial offering about matters such as:
*The identity or existence of the company, resulting in victims investing in a non-existent corporation or business
*Availability and quantity of shares or securities
*Business activities or prospects
*Identity and value of assets
*Academic, employment and professional backgrounds of company management
A New Jersey securities fraud lawyer also represents those — especially brokers — accused in fraud involving securities’ transactions on an exchange market. Fraud in the secondary securities markets arise from lies about the trading price, profitability, company values, favorable outcomes in court cases, business opportunities, changes in company management and the supply or demand for the securities in question.
Prosecutors look for fraudulent statements in a company’s prospectus, which is a legal document prepared under regulations of the U.S. Securities and Exchange Commission. The prospectus explains to potential investors the company or assets under consideration for purchase or acquisition. Within its pages lie matters such as management or financial condition of the company. You can also face fraud accusations for oral, written or digitally-transmitted misrepresentations.
Omissions
In some circumstances, your failure to speak may subject you to a securities fraud prosecution. Securities fraud can turn on your failure to disclose a fact when such an omission renders some other statement false or a statute or regulation mandates that you reveal the information. Quite commonly, changed circumstances or new information makes a prior statement no longer accurate. When you learn of the changed information and conceal it, prosecutors will claim that you perpetrated the prior representation knowing it was false.
Market Manipulation
Federal and New Jersey statutes prohibit individuals from schemes designed to artificially move the price of securities. To manipulate the price upward, a single perpetrator or a group of conspirators secretly buy small amounts of security. By using multiple identities or entities (some which may be phony) to buy stock, the fraud artists create the impression of increased demand and thereby push the price upward. Public announcements or press releases of the purported purchases and demand perpetuate the lies.
Insider Trading
Securities fraud can arise from actions other than misstatements or omissions of material facts. This brings into view the concept of insider trading. These acts of fraud involve a person, especially officers, directors or employees, of companies who buy or sell stock on the basis of information not available to the public. Examples of such inside information may include:
*Decisions on a patent application or other government action revealed to the offender, but not made public
*Plans for company mergers or acquisitions
*Confidential information about drugs, devices and other products under development
*Financial condition of company not known or revealed publicly
Criminal and other liability for insider trading extends to people such as executives, those who stand in a fiduciary duty to a company or client possessing the confidential information (such as attorneys, accountants, brokers), persons who “tip” others on the inside information and government employees or officials who trade on or otherwise deal with the inside information.
Defending Securities Fraud Prosecutions
If you face allegations of securities fraud, you will likely have to defend yourself in multiple arenas. Criminal prosecutions often start as investigations or inquiries by the Securities and Exchange Commission or state securities law enforcement agencies. Harmed or disappointed investors may institute lawsuits based on your representations and omissions which formed the basis of investor acquisitions of your stock.
These civil agency and private lawsuits can place your in a legal bind should criminal charges loom. To be sure, you have the right to not incriminate yourself. However, shielding your statements proves more difficult in civil actions whether the Fifth Amendment privilege against self-incrimination does not apply. Your refusal to testify, answer interrogatories or produce documents could allow plaintiffs to have allegations treated as true — for purposes of the civil cases.
Having a New Jersey securities fraud and securities offenses lawyer can afford you assistance in responding to these discovery requests and to subpoenas by prosecutors. The legal representation will include presenting defenses such as lack of intent to deceive or that you rendered opinions in good faith and based upon reliable information.