A securities fraud lawyer investigates accusations of security fraud and can assist those who have been harmed because of the situation. The cost associated with this type of fraud can be in the billions of dollars an affect people from all walks of life, especially if the fraud is linked to a large corporation.
Understanding the risk for securities fraud and recognizing red flags when investing can make it easier to protect your investments, but knowing what to look for isn’t always enough to prevent a scam from occurring. A securities fraud lawyer might be able to help you if you’ve been victimized by an investment scam.
What are Some Examples of Securities Fraud?
Securities fraud occurs in a variety of forms and usually involves the misrepresentation of information. Brokers and brokerage firms are responsible for providing complete and accurate information to investors and when they fail to do so they are in violation of the law.
Unfortunately, there are instances in which information is withheld or given dishonestly on purpose.
Some of the most common intentional security fraud scams include
- Misrepresentation of investment
- Hedge-fund related schemes
- Ponzi schemes
- Pyramid schemes
- Advanced fee schemes
- Foreign currency fraud
- Broker embezzlement
- Omissions of material facts
- Unauthorized trading
- High yield investment fraud
- Late day trading
- Manipulating stock prices
- Lying on SEC filing forms
- Committing accounting fraud
Securities fraud can be committed by a stockbroker, a broker firm, or an investment bank.
The FBI warns investors to be wary of brokers and brokerage firms that are pushy or aggressive. It’s also a good idea to avoid unsolicited attempts to get you to invest your money. If any investment products make you uncomfortable or seem too good to be true, it’s better to avoid them.
How Might a Securities Fraud Lawyer Help Duped Investors?
A securities fraud lawyer might be able to help clients recover funds invested and lost because of a scam.
Securities fraud attorneys investigate cases of potential fraud and assist those who were victimized recover their investment. A securities fraud lawyer might:
- Review all pertinent information and determines if securities fraud occurred
- Determine how much money was lost as a result of the scheme
- Secure the testimony of financial experts regarding a specific case and the industry in general
- File a Statement of Claim with FINRA
- Gather documents relevant to a claim
- Submit evidence to FINRA
- Represent the client during the final FINRA hearing
As part of their jobs, financial advisors must understand their client’s risk tolerance and their investment objectives before suggesting any investment products. Brokers and firms must disclose all relevant information concerning every product and explain the risks associated with each product.
Even if no intentional fraud occurred, brokers and brokerage firms can be held responsible for clients losing money if they failed to do any of these things prior to a client purchasing an investment product.
Questions You Should Ask a Securities Fraud Attorney during Your Initial Meeting
An experienced securities fraud attorney will begin by asking you questions about your investment experience and will assess the experience to determine if any crimes were committed.
It’s also important that you feel comfortable before hiring a specific attorney and that you have some idea that your expectations will be met.
During an initial consultation, you might consider asking a securities fraud attorney:
- If the primary focus of their practice on investment and securities fraud
- If they are a FINRA attorney
- What they do to stay up-to-date and informed about the latest investment scams
- If they’ve represented clients with cases similar to yours
- How much experience they have with FINRA arbitration
As the victim of securities fraud, you are likely devastated by having been duped. A securities fraud attorney might be able to help you determine what happened and help you figure out if there is a way to resolve the problem. Contact us to learn more or to schedule a consultation with a securities fraud attorney.
More About Securities Litigation Reform Act (PSLRA)
The adoption of the Private Securities Litigation Reform Act (PSLRA) in 1995 helped defendants in securities fraud cases by increasing the pleading requirements for successful litigation. PSLRA was created in order to reduce the number of frivolous lawsuits related to SEC Rule 10b-5 outlined in the Securities Exchange Act of 1934. Originally, the 1934 Act protected investors, but as time evolved, defendants plead with the United States Congress to raise the bar on requirements for Rule 10b-5 acceptance by the courts.
Specifically, PSLRA raised the pleading standards for lawyers in security fraud cases. PSLRA requires the plaintiff’s lawyers have more facts in-hand suggesting deliberate fraud before they can proceed with a case.
There are three significant new requirements as a result of PSLRA:
- Requirement that false statements be pleaded “with particularity”;
- Requirement that pleading create a “strong inference” of scienter;
- Requirement that the plaintiff prove loss causation.
The requirement that false statements be pleaded “with particularity” means the plaintiff’s security fraud lawyers must identify in their complaint each statement alleged to have been misleading. The lawyers must also state the reasons why the statement was misleading and all facts related to why a particular belief is formed if an allegation regarding the statement or omission by the defendant is made on information and belief. The purpose of requiring plaintiff’s lawyers to set forth with particularity the reasons they find a statement by the defendant misleading is to enable the opportunity for the defendant’s lawyers to put forth arguments in defense.
Like the requirement that false statements be pleaded by security fraud lawyers with particularity, the requirement that “strong inference” of scienter requires that particular facts be given regarding the defendant’s state of mind. This task is often difficult for securities fraud lawyers as their case must be presented without the use of the legal discovery process providing access to needed witnesses and documents helping prove the defendant’s state of mind.
It is now required that plaintiff’s lawyers allege loss causation in the complaint. Also, loss causation has been refined in the Supreme Court decision in Dura Phramaceuticals v. Broudothat economic damage be suffered after relevant truth about the fraud comes to light. For example, a victim who buys a security at an inflated price based on fraudulent information and then sells the security at the same inflated price has suffered no damage. Even if the truth comes out later that the price was inflated with fraudulent information, no loss was caused to the plaintiff. Rather the bad price is considered to be absorbed by the market. Only if the same individual had held onto the security purchased at a bad price until the price fell at the revelation of fraudulent news would the victim be considered to have suffered loss causation.
While PSLRA of 1995 may be considered a victory for defendants of securities fraud litigation by reducing the number of frivolous lawsuits in federal court, the legislation has made it more difficult for a defendant to avoid settlement when all of the pleading requirements are met. For example, if a Rule 10b-5 case is not dismissed, the door is opened for securities fraud lawyers to use the discovery process to depose witness and seek relevant documentation supporting their case. Securities fraud lawyers will then seek class certification by the court to making the case a class action lawsuit. Class certification puts tremendous pressure on the defendant to seek a favorable settlement.
PSLRA might have assisted in decreasing the number of frivolous lawsuits, but securities fraud remains a significant problem in the United States. The abuses by Enron, WorldCom and financier Bernard Madoff demonstrate the damage securities fraud brings to numerous victims. Such significant abuse necessitates assistance from experienced securities fraud lawyers.
Seeger Weiss LLP’s lawyers are experienced in securities fraud litigation and know how to meet the pleading requirements set forth in PSLRA. If you have a case, please contact Seeger Weiss LLP’s securities fraud lawyers.
Seeger Weiss LLP’s law firm also handles cases involving drugs and toxic injury, personal injury, asbestos and mesothelioma,class actions, securities fraud, and commercial litigation. Seeger Weiss LLP has offices in New York, New Jersey, and Philadelphia.