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What Is Securities Fraud?

Simms Law, P.C. June 14, 2022

Securities fraud is a type of white-collar crime that primarily involves misrepresenting information that investors use to make investment decisions. In many cases, securities fraud affects retail investors when a broker or financial advisor misrepresents the risks and characteristics of an investment, resulting in the purchase of unsuitable security. There are many laws in place that prohibit securities fraud. Unfortunately, however, financial professionals sometimes violate these laws in pursuit of easy profits. Below are some of the most common types of securities fraud. If you are a victim of securities fraud, please contact an investor representation attorney as soon as possible. 

Types Of Securities Fraud

Financial statement fraud – Investors rely on financial statements to make informed investment decisions. Unfortunately, however, public companies sometimes file fraudulent financial statements in order to hide negative financial information from the public. Financial statement fraud occurs most often when a private company goes public.

Insider trading – If you watch the news, you’re probably at least somewhat familiar with insider trading. Insider trading occurs when company insiders use private information to make profitable stock trades. For example, if an insider at a company knows that the organization plans on making a large, profitable acquisition in the near future, and he or she purchases additional shares of stock based on this information, he or she has engaged in insider trading. 

Market manipulation – Market manipulation is a form of securities fraud in which a deliberate attempt is made to interfere with the market to create false, artificial, or misleading appearances regarding products, securities, commodities, or currencies.

Churning – Churning occurs when a financial professional makes unnecessary trades on a client’s account in order to increase commissions. 

Unauthorized trading – Financial advisors must obtain permission before trading securities on an investor client’s account. When a financial advisor or other financial professional makes trades on a client’s account without permission, this is considered unauthorized trading. 

Misrepresentation and omission – Misrepresentation is the act of purposely providing false information regarding security. Omission is a form of misrepresentation in which negative information regarding security is withheld. 

Unsuitability – Financial professionals must make investments that are suitable for their clients. When they fail to do so, this is considered a form of fraud. 

Misappropriation – Finally, misappropriation occurs when a financial professional illegally appropriates the funds of his or her clients. 

Fort Lauderdale Investor Representation Attorney 

At Simms Law, P.A., we are passionate about helping the victims of securities fraud. Our experienced Fort Lauderdale investor representation attorney understands what is at stake when investors suffer losses due to securities fraud. Therefore, when we take you on as a client, you can rest assured that we’ll do everything in our power to ensure that you are compensated for your losses. If you suspect that any suspicious activity has occurred in any of your investment accounts, or if you believe that you have been misled about the nature and risks of any of your investments, please contact our Fort Lauderdale investor representation attorney today for a free consultation.