Virginia Federal Securities Fraud Attorney
Securities include stocks, futures, bonds, and options. They are regulated by the US Securities Exchange Commission (SEC), an independent regulatory agency that oversees the primary (registration) and secondary (trading) securities markets in the United States. Securities sold in the US must be registered.
The primary goal of securities regulation is to provide investors with necessary and accurate information so they can make investment decisions (e.g., whether to buy or sell stocks). When an individual, firm, or corporation misrepresents such information, they may face securities fraud charges. In addition, if an individual engages in insider trading, this also qualifies as securities fraud.
The SEC has the jurisdiction to handle civil prosecutions, while the Securities and Commodities Fraud Task Force within the Department of Justice (DOJ) conducts criminal prosecutions. If you, or your company, have been charged or you are under investigation by the SEC, please contact a Virginia federal securities fraud lawyer today.
The US Securities Exchange Commission
According to the SEC’s website, their mission “is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.” The SEC enforces securities regulations and laws, bringing both administrative and civil actions against people and companies. In addition to filing actions, the SEC is a large and formidable investigative agency that allocates substantial resources to investigating securities fraud.
Because of the nature of this kind of fraud, the SEC is well-trained at sifting through and analyzing complex financial transactions. SEC enforcement may take place either in federal court or before an administrative law judge.
Therefore, it is imperative that individuals and companies charged with securities fraud contact a federal criminal defense lawyer who is experienced with and knowledgeable of securities fraud allegations. The SEC will have the expertise to present their case; you need a lawyer with similar skills and resources to present your defense.
Types of Securities Fraud
Securities fraud covers a broad swath of violations, including everything from stock manipulation to Ponzi schemes to insider trading. 18 U.S. Code Section 1348 defines securities and commodities fraud as “[w]hoever knowingly executes, or attempts to execute, a scheme or artifice.” For the full definition, you can find the code here. For a list of securities fraud offenses, please refer to the following website. For a brief overview of some of the more prominent types of securities fraud, please see the subsequent paragraphs below.
Certain types of insider trading are lawful. Generally, corporate insiders may trade securities of their own corporation if they report such transactions to the SEC. However, this behavior becomes unlawful when either the trades go unreported, or when the trades are made because the insider has material nonpublic information.
This information can include major and confidential developments in the company that would affect the viability of the company or the price of the stock, particularly once the information is public. This is particularly true where the insiders’ transactions are a breach of the insiders’ fiduciary duty to the company and its investors.
Furthermore, unlawful insider trading can occur when a person who possesses material non-public information tips such information to another person. It also extends to any securities transactions driven by such tips. Unlawful tipping includes providing the material nonpublic information to friends, family, and business associates. Importantly, the tippee (i.e. the person who received material nonpublic information from the tipper) can be held liable (see Dirks v. SEC, 463 U.S. 646 (1983)).
The prosecution must demonstrate that the tippee knowingly possessed the information when making the purchase or sale of a security, and that the tippee acted willfully.
Under the classical theory of insider trading, insiders who obtain material nonpublic information and trade on such information are guilty of insider trading. Under this theory, an insider is considered to be a person that has some particular relationship to the issuing company. The courts have considered there to be two types of insiders. The first is an insider who owes a direct fiduciary duty to the issuing company and the company’s shareholders (e.g. the CEO).
The second is an insider who is a temporary or quasi-insider, who through a temporary relationship to the issuing company acquires a fiduciary duty to the company and its shareholders (e.g. an attorney retained by the issuing firm).
The SEC takes insider trading very seriously, and “has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.” Those who are accused and found guilty of insider trading face not only the threat of incarceration but also civil penalties, as outlined in 15 U.S. Code Section 78u-1. To view the full text of the code, please click here.
Moreover, SEC investigations into insider trading can be the result of tips or complaints by people and companies with antagonistic interests. If you are charged with insider trading, please contact an experienced federal securities fraud lawyer today with any questions you may have.
Ponzi and Pyramid Schemes
Ponzi and pyramid schemes are fraudulent practices that promise high rates of return on investment on a legitimate enterprise. In reality, the earlier investors’ high returns are illusory and the money is merely the funds from new investors.
Manipulating Market Price of Securities
There are numerous ways to manipulate the market price of stocks or other securities. One of the primary ways to do this is to misrepresent the appearance of the securities’ market price by artificially driving the price up or down.
Contacting a Federal Securities Fraud Attorney
The SEC is a formidable investigative agency with the resources and expertise to provide federal prosecutors with strong cases. For this reason, it is important that people facing securities fraud charges contact a federal defense lawyer with both the skills and the resources to build a solid defense. If you have any questions, please contact us today for a free initial case evaluation.