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What are the elements that constitute securities fraud?

On Behalf of | Jan 31, 2023 | Criminal Law |

A substantial loss of money in an investment might motivate someone to accuse an adviser or broker of securities fraud. Raw emotions can plant suspicions of dishonesty on the part of a trader or stockbroker even when no such intentions exist.

Understanding the elements of securities fraud and some examples can help a defendant combat flimsy charges in this type of case.

What is securities fraud?

This white-collar crime may also go by the name of investment or stock fraud. The primary element is falsifying or misrepresenting information to influence an investor’s decision. Additionally, insider trading involves selling or purchasing stocks on the basis of knowledge inaccessible to the public.

Fraud can occur if a trader intentionally offers poor advice, withholds crucial details about a deal or provides inaccurate information to deceive investors. There must be a connection between the misrepresentation or omission and the purchase or sale of a security. A conviction in a securities fraud case can carry hefty fines and long prison terms.

When might accusations of securities fraud arise?

An executive or high-level employee could face accusations of such fraud by selling stocks before the public release of information that could affect a stock price. For example, a scandal may be about to break, or significant corporate developments may soon occur.

Others might face charges if someone believes a responsible person disseminated false information to manipulate a stock price. Intent becomes a significant factor in the case.

Large amounts of money circulating means traders have to make many decisions that might unintentionally have links to dubious actions. Though a broker attempts to perform due diligence, oversights can occur. Understanding the potential dangers and possible defenses can protect an unsuspecting investor from punitive prosecution.