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Securities Fraud and Stock Fraud

Stock fraud typically occurs when the issuer of the security makes false statements about the company's status or fails to disclose important facts that may affect stock value. Due to this inaccurate information, investors are induced to purchase securities at artificially inflated prices. Securities lawyers can help consumers with cases involving investment securities and stock fraud.

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Examples of Investment Fraud by Public Companies

  • Misrepresentations - the company announces false statements or omits details of the company's financial status or sales performance with intent to attract and retain investors.

  • Violations of the Generally Accepted Accounting Principles (GAAP).

  • Illegal Insider Trading - employees or officers of the company trade stocks based on non-public information.

  • Violations of Employee Retirement Income Security Act (ERISA) - the company's trustees breach their fiduciary duty by allowing employees to trade stock at artificially inflated prices due to undisclosed problems.

  • Industries that have experienced stock fraud and securities fraud lawsuits in 2004-2005 include insurance, technology, communications, medical, and utilities.

Examples of Stock Broker Fraud

  • Misrepresentation/Omission - a broker intentionally misleads or does not disclose details and risk factors of a certain stock to the client.

  • Unsuitability - a broker recommends investments/stocks that are unsuited for the client's risk level and finances.

  • Churning - a broker conducting an unnecessary quantity of transactions which generate profit per transaction fees for the broker.

  • Overconcentration - a broker fails to diversify a client's investment portfolio.

  • Tipping - brokers and brokerage houses tipping clients to buy or sell securities based on non-public information. Also referred to as Illegal Insider Trading which includes brokers selling IPO, pre-public stocks to favored clients/friends.

Securities Fraud

stock fraud Investors especially small investors have lost millions upon millions of dollars due to stock fraud.

Companies that trade their stocks have legal responsibilities to those who buy their stock. Stock brokers also have legal obligations to the people they sell their stocks to. If either a company or a broker has committed fraud against you, you may be able to get some of your investment back.

Securities fraud class action lawsuits can be brought against the persons or entities that violated the Securities and Exchange Act of 1934 (the "Exchange Act") and/or the Securities Act of 1933 (the "Securities Act").

Claims can be brought against the issuer of the security, i.e. the public company, the company's officers, directors, or others involved in the violation, including stock brokers, underwriters, or auditors.


Securities Fraud Legal Help

If you or a loved one has suffered losses from securities fraud, please click the link below to send your complaint to a lawyer to evaluate your claim at no cost or obligation.


Last updated on Jan-1-10

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