Securities Fraud

 

Were You the Victim of Securities Fraud? Contact Our Law Firm Today

At Mika Meyers, PLC, our securities fraud attorneys are skilled, experienced, and justice-driven advocates for investors. We hold securities issuers and financial advisors accountable for their material misrepresentations and omissions to investors. If you have any questions or concerns about a securities fraud claim, we are here as a resource that you can trust. Contact us today at (616) 632-8000 for a free, strictly confidential consultation with an experienced securities fraud lawyer.

What is Securities Fraud?

Securities fraud involves the intentional misrepresentation of material facts in relation to a securities transaction, or the intentional omission of material facts under circumstances where there is a duty of disclosure. Investors who are induced to purchase a security or follow investment advice based on false information can seek recourse under various state and federal laws. In addition, securities regulators like the United States Securities and Exchange Commission (SEC) pursue enforcement actions against those who violate securities laws. In some situations, criminal proceedings may be instituted.

An Overview of Securities Law

There are a multitude of state and federal laws that make it unlawful to mislead and defraud investors in connection with the purchase or sale of securities. Here are some of the most notable securities laws that investors should be aware of:

• Section 10(b) of the Securities Exchange Act of 1934: One of the most important federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 is a key provision that prohibits market manipulation and fraud and deceit in connection with the purchase or sale of any security. Courts have found that individual investors can bring a private cause of action for violation of Section 10(b) against a person who engages in fraud or deciet in connection with the sale of a security. In addition, the law empowers the SEC with the authority to enforce Section 10(b). The SEC enforces Section 10(b) by promulgating regulations, namely SEC Rule 10b-5, and bringing enforcement actions against violators.
• SEC Rule 10b-5: SEC Rule 10b-5 was promulgated by the SEC under authority granted in the Securities Exchange Act. The rule expressly prohibits making any untrue statement of a material fact or omitting to state a material fact necessary to make the statements made in the light of the circumstances under which they were made, not misleading. It also provides for “scheme liability” against those who are involved in schemes to defraud investors, even if those individuals are not directly responsible for actionable misrepresentations and omissions.
• The Sarbanes-Oxley Act of 2002 (SOX): Enacted in response to major corporate and accounting scandals of the late 1990s and early 2000s, the Sarbanes-Oxley Act established a strict set of reforms designed to improve financial disclosures from corporations and prevent accounting fraud.
• The Dodd-Frank Wall Street Reform and Consumer Protection Act: The act was passed in response to the 2008 financial crisis and aims to decrease various risks in the U.S. financial system. It introduced a comprehensive set of financial regulatory reforms, including the creation of agencies such as the Financial Stability Oversight Council and the Consumer Financial Protection Bureau. Dodd-Frank also enhances whistleblower rights.
• State Law (Blue Sky Laws): Each of the 50 states has its own set of securities laws, commonly known as “blue sky” laws. Many States have modeled their blue sky laws on the Uniform Securities Act, which contains a variety of different civil liability provisions. While there are many similarities in state-level securities laws, there are some notable differences as well. Investors should have a general awareness of their rights and avenues of recourse under both state and federal securities laws.

Know the Most Common Types of Securities Fraud

Securities fraud can take a wide range of different forms, and can be difficult to detect. All suspicions of securities fraud require a proactive, thorough investigation. Some of the most common examples of securities fraud include:

• Ponzi Schemes: A Ponzi scheme is a type of fraudulent investing scam in which earlier in time investors are paid back principle and interest with funds acquired from subsequent investors, not profits from a legitimate business. Ponzi schemes eventually collapse when new investors cannot be located. In most Ponzi schemes, the perpetrator is siphoning off investor funds for his own benefit.
• Material Misrepresentations/Material Omissions: It is unlawful to make false statements about material facts or to withhold material facts in connection with a securities transaction. A material misrepresentation or omission can lure investors into making decisions based on inaccurate, misleading, or incomplete information. Frequently, the representations and omissions relate to a company’s financial condition or performance.
• “Pump and Dump” Schemes: In these schemes, fraudsters inflate the stock price of a company by sharing positive (but false) information to create a buying frenzy. Once the stock price rises, the fraudsters then “dump” their own shares at the inflated price. After the operators sell their overvalued shares, the price drops, leaving investors with major losses. Penny stocks are most often used to facilitate pump and dump schemes.
• Unregistered Securities: Registration requirements for securities exist to help protect investors. The sale of unregistered securities that are required to be registered with the SEC or state regulators is a form of securities fraud.

Understanding the Role of the Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority (FINRA) plays a crucial role in the oversight and regulation of brokerage firms and their agents in the United States. FINRA is a self-regulatory organization that is responsible for ensuring that the securities industry operates in a fair, honest, and legally compliant manner. Among other things, FINRA develops and enforces rules governing the ethical activities of all registered broker-dealer firms and registered brokers. FINRA also oversees a comprehensive arbitration process. When disputes arise between investors and brokers/brokerage firms over a potential securities law violation, the matter is often resolved through the FINRA arbitration process. While investors do not have standing to bring a claim for violations of FINRA rules, they can bring common law negligence claims and claims under Section 10(b) of the Securities Act which allege that the defendant failed to act in accordance with the applicable standard of care by violating FINRA rules.

How the Securities Fraud Attorneys at Mika Meyers Can Help

Securities fraud claims are complicated. If you or your loved one suffered significant investment losses due to a securities law violation, it is normal to have a lot of questions about your rights and your options. At Mika Meyers, PLC, we are committed to advocating for victims of securities fraud nationwide. Our track record of successful case results speaks for itself. When you reach out to our law firm, you will have an opportunity to consult with a securities fraud attorney who is ready to:

• Hear what you have to say and answer questions about investment fraud claims;
• Investigate your case—gathering evidence to prove the securities law violation;
• Document your investment losses and represent you in any settlement negotiations; and
• Take aggressive legal action focused on helping you secure the maximum compensation.

What is a Security?

In the context of securities law, a security is a financial instrument that represents an ownership position in a publicly traded corporation (stock), private company, or other financial asset, such as a promissory note. In other words, the term “security” covers a wide range of investment products.

Do I Have a Securities Fraud Claim?

If a person misrepresented something to you or withheld important information from you in connection with the purchase or sale of a security (e.g., stock, bond, variable annuity), there is a good chance that you have a securities fraud claim against that person or entity. Generally speaking, it doesn’t matter if the misrepresentation was written or oral or whether it was made to you individually or to a group of investors.

Is Securities Fraud a Criminal or Civil Case?

Perpetrators of securities fraud are often charged with crimes such as wire fraud or mail fraud. The purposes of criminal proceedings include punishment, deterrence, and rehabilitation. Prosecutors may also to recover restitution for specific victims. Civil cases are exclusively focused on recovering damages for the victims, and they may result in monetary judgments against the defendant, which can be enforced by seizing assets and garnishing wages.

What is Securities Arbitration?

Arbitration is a method of resolving disputes outside of court. Instead of a judge or jury deciding the dispute, an arbitrator or panel of arbitrators will render the decision. Common forums for securities arbitration cases include FINRA Dispute Resolution and the American Arbitration Association. Securities fraud cases often end up in arbitration instead of court, because financial advisors generally include arbitration clauses requiring arbitration in their service agreements. The U.S. Supreme Court has held that these clauses are enforceable. The relative merits and drawbacks of arbitration and litigation are the subject of considerable dispute, but some argue that arbitration is faster, less costly, and less formal than litigating in court.

Consult with a Lawyer About Your Securities Fraud Claim

If you think you may be the victim of securities fraud, you should consult with an experienced securities fraud lawyer immediately. Trying to handle the matter yourself is seldom the right thing to do because the law and procedure are complex and your adversary will likely have a team of attorneys working against you. Your attorney can review your case and help you determine the best course of action to get justice and compensation for your investment losses.

At Mika Meyers, PLC, we have attorneys whose practices are dedicated to helping victims of securities fraud. Our securities fraud lawyers practice nationwide and are standing by, ready to advocate for your rights. If you think that you may be the victim of securities fraud, you should contact one of our experienced securities law attorneys immediately for a free consultation. To speak with one of our investor claims attorneys now, call (616) 632-8000. For a call back, contact us directly online and leave a message.