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Securities Fraud and Stock Fraud

Securities fraud, also known as stock fraud or investment fraud, is an illegal practice designed to convince investors to buy or sell stocks or securities on the basis of false information. This false information includes inaccurate statements about a company's status or omissions regarding facts that could affect stock value. Victims of stock investment fraud are at risk of losing a lot of money. Although there are laws to prevent securities investment fraud, some unethical financial advisors, stock brokers or financial firms still commit securities fraud.


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Securities Fraud

Securities fraud occurs when a person or organization purposely makes false statements—or omits important facts—about a company's status with the purpose of influencing an investor's decisions to buy or sell stock and securities. Securities fraud can include actions on the part of the financial advisor or stockbroker, or actions on the part of the company or officers of the company whose stock is at issue. Often, securities fraud involves investors purchasing securities at artificially inflated prices.

Activities that can be considered securities fraud on the part of the company:
  • Misrepresentations—the company releases 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; and
  • 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.
Activities that can be considered securities fraud on the part of the financial advisor or stockbroker:
  • Misrepresentation/Omission—a broker intentionally misleads the investor 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 conducts an unnecessary quantity of transactions which generates profit per transaction fees for the broker;
  • Overconcentration—a broker fails to diversify a client's investment portfolio; and
  • 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.
Investors, especially small investors, have lost millions upon millions of dollars due to stock fraud.

Securities Fraud Litigation

stock fraudCompanies that trade their stocks have legal responsibilities to those who buy their stock. Stockbrokers also have legal obligations to the people they sell their stocks to. Although there is an accepted degree of risk in any investment, that risk should be a natural result of the stock market and not due to any misstatement or omission of information from the company or the stockbroker.

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 stockbrokers, underwriters, or auditors.

Ponzi Schemes

Additionally, customers could become victims of illegal schemes, perpetrated both by licensed financial advisors or people operating without a license. These illegal schemes are called Ponzi schemes and they are a type of securities fraud. In a Ponzi scheme, returns paid to existing investors come from funds contributed by new investors, rather than from any legitimate gains in the investment itself. The investment fraud ultimately fails when the fund no longer attracts new investors or when a large number of existing investors cash out.

Securities Fraud Lawsuits

A California securities fraud lawsuit has been filed against Netflix, alleging the company made "materially false and misleading statements regarding the company's business practices." The lawsuit names several Netflix executives and directors. According to the class action lawsuit, investors made decisions about Netflix based on statements from the defendants, which allegedly concealed potential problems in the business.

A separate California securities lawsuit involving investors in the state could be worth approximately $750 million. The lawsuit was filed by investors who allege they lost money to the people in charge of a limited partnership that offered investments in California properties. The properties were allegedly in desert or swampland out of state. The class action lawsuit claims the defendants violated securities law and lied to investors.

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.
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Pfizer to Pay $486 Million to Settle Securities Lawsuit
Pfizer to Pay $486 Million to Settle Securities Lawsuit
August 2, 2016
New York, NY: Pfizer will pay $486 million to settle a class action securities lawsuit alleging the drug maker misled investors about the safety of its drugs Celebrex and Bextra. Pfizer did not admit to wrongdoing in the securities fraud allegations, stating it agreed to the settlement to avoid the distraction of litigation. The securities fraud lawsuit had been dismissed by a US District Court judge but was revived by a federal appeals court in April 2016. READ MORE

California Files Securities Lawsuit against Morgan Stanley
California Files Securities Lawsuit against Morgan Stanley
April 15, 2016
San Francisco, CA: California’s Attorney General Kamala Harris has filed a securities lawsuit against Morgan Stanley, related to mortgage-backed securities sold by Morgan Stanley. The lawsuit alleges Morgan Stanley failed to disclose important information about the quality of the investments, causing various state pension funds to lose hundreds of millions of dollars. READ MORE

Chipotle Faces Securities Lawsuit, among Others
Chipotle Faces Securities Lawsuit, among Others
January 25, 2016
Simi Valley, CA: In the wake of an E. coli outbreak and a norovirus outbreak, Chipotle faces a securities lawsuit and other lawsuits alleging the company attempted to hide the outbreak and misled investors about the nature of its sanitation procedures. This is in addition to a criminal investigation linked to the foodborne illness outbreak in Simi Valley. READ MORE


Posted by

I have a 401-k through Chrysler Corp. I'm retired but I can still sell or buy stocks in my 401. On 4-07-08 I went online with Merrill Lynch to sell a stock ( aete ) they didn't sell It. Two days later I called Merrill Lynch and they sent the order through, but It Didn't sell. I called again several times. Well they did sell It for a big loss.

My $3500.00 became $900.00 they said they are sorry for my loss and they didn't know why It didn't sell. The sale went through on 4-17-08. I thought they should pay the price of 4-07-08. They goofed and they know It. What can be done at this point.


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