There are many rules, regulations, and laws by which professionals in the securities industry must comply with. Yet these mandates are commonly abused, and tend to be violated in predictable ways. Below are some of the most common securities abuses.
Insider trading – Insider trading occurs when an individual with inside knowledge of an organization’s dealings uses that information to make stock trades. It is a violation of securities law for anyone with access to such information to buy or sell stocks based on this unique knowledge.
Fraudulent financial statements – Companies sometimes file fraudulent financial statements or other documents to the detriment of their stakeholders and investors. Fraud most commonly occurs in relation to a company’s public offerings.
Market manipulation – Market manipulation refers to activities undertaken to create a false impression about a security, including its trading activity or price movement.
Churning – Churning refers to excessive trading on a client’s account by a stockbroker in order to boost commissions.
Unauthorized trading – Stock brokers are required to obtain investor permission before executing trades. Unauthorized trading refers to trading without investor authorization or in contradiction of a client’s instructions.
Misrepresentation/omission – Misrepresentation and omission occur when investors are purposely given incorrect or incomplete information by a firm or broker.
Unsuitability – Unsuitability refers to investment recommendations by a stock broker that are unsuitable for a particular investor.
Misappropriation – Misappropriation occurs when a broker appropriates client funds without permission. Both the individual broker and the broker’s firm may be liable for the misappropriation.
Legal Options for Investors
There are several legal actions available to investors who have been victims of securities fraud. In addition to legal actions in both state and federal court, the following options are typically available to victims of securities fraud:
Securities class-actions lawsuits – When a group of investors suffer a common injury due to the improper conduct of a company, they may be able to participate in a securities class-action lawsuit. Securities class-actions typically arise from actions such as insider trading and fraud.
Arbitration – Broker retention agreements typically require investors to resolve claims against a broker by arbitration. Investors often succeed in securities arbitrations, particularly when represented by a team of experienced Texas securities-fraud attorneys.
Ajamie LLP works with individuals and companies across the United States, as well as clients domiciled abroad, to recover investment losses. Our team of experienced Texas securities-fraud attorneys advises clients in matters involving the Securities Exchange Act of 1934, Investment Advisors Act of 1940, and other federal and state laws. We also deal with regulatory authorities and self-regulatory organizations such as the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). If you’ve suffered financial injury due to securities fraud, please contact us at (713) 860-1600.