When investors experience investment losses, they may need to become more familiar with the complex regulatory and legal issues that could have contributed to or directly caused those losses. A dedicated investment fraud lawyer can provide a fresh perspective and seasoned legal counsel to recover losses.
Securities fraud covers many illegal actions that can impact investments and regulated markets. The list of potential violations is extensive, from insider trading to selling unregistered securities.
Many people invest their money into securities for various reasons, such as building wealth for retirement or other goals. They rely on financial professionals, brokers, and investment advisors to make sound investments per their risk tolerance and objectives. However, unscrupulous brokers and other financial professionals commit fraud by making misrepresentations that lead to investment losses for their investors and clients.
When an investor suspects that they are a victim of securities fraud, they may report the matter to the Securities and Exchange Commission (SEC). This federal agency investigates allegations of securities fraud and carries out its duties by federal law. Its Tips, Complaints, and Referrals system relies on members of the public to come forward with information about suspected fraud in the securities markets.
Even if you don’t have solid proof, it may be worth talking to an experienced securities attorney. By analyzing your account statements and other evidence, a lawyer could help you recover just compensation for your losses from the broker, firm, or individual responsible for the fraud.
Look for redflags
Every year, securities fraud siphons billions of dollars from unsuspecting investors. The best way to avoid becoming a victim of investment fraud is to stay vigilant and look for red flags that may indicate fraud. A few warning signs include promises of high returns with little or no risk, overly consistent returns, and a sense of urgency from the promoter to make additional deposits.
In addition, it is a good idea to check the background of anyone who solicits you for investments or financial services by searching the SEC’s Investment Adviser Public Disclosure (IAPD) online database and the Financial Industry Regulatory Authority’s BrokerCheck online database. It is also a good idea to request copies of relevant documents and compare them with the information provided orally.
Lastly, a person should be wary of a broker who claims affiliation with their club, congregation, or support group. These brokers often engage in affinity fraud, where they scam members of a particular community by using a trusted connection to gain their trust and confidence.
Despite being well-informed and diligent about investing, it is still possible for even the most savvy individuals to fall prey to securities fraud. However, by staying alert and recognizing some of the more common red flags of fraudulent investment opportunities, seniors can significantly reduce their chances of being ripped off.
Look for a pattern
Securities fraud is a broad term that encompasses a wide range of deceptive or fraudulent activities related to stock and commodity markets. A securities fraud attorney can act as your representative by using their legal knowledge to look into shady financial transactions and expose fraud, ensuring that your financial future won’t be built on pretenses. Securities are financial instruments representing owners’ rights to income, voting, and other benefits. They include stocks, bonds, treasury securities, mutual funds, structured notes, and other investments. Individuals can commit securities fraud in several ways, including withholding information from investors or misrepresenting it. Corporations can also commit securities fraud by hiding financial information from their shareholders or putting out false statements. Independent investors can also engage in securities fraud, including insider trading or market manipulation.
The most common form of securities fraud is misconduct by investment advisors or brokers. These financial professionals are supposed to act in their clients’ best interests, but often, they do not. They may recommend certain stocks or mutual funds because they will generate high commissions rather than because they are a good fit for their client’s portfolios. They may also omit important information about an investment, such as the risks or fees charged by a brokerage or advisory firm.
Other types of securities fraud include Ponzi schemes, pyramid schemes, advance fee fraud, foreign currency fraud, broker embezzlement, and hedge fund-related fraud. These schemes deceive investors by promising high returns with little to no risk. The federal securities laws make it illegal to lie to investors or manipulate the financial markets in any way.
While preventing all fraud is impossible, you can help protect yourself from it. Start by being proactive and practicing caution when investing your money. Make sure you do your research and constantly invest with a reputable broker that is required to follow securities laws and provides insurance protection through the Securities Investor Protection Corporation. Be wary of promises of guaranteed or risk-free returns, and remember to only share your personal information with a trusted partner or advisor and never over email (use business email compromise).
Another critical step is familiarizing yourself with your rights as a crime victim. Federal and, in some cases, state laws give victims of fraud several rights, including the right to recover their losses through arbitration claims or lawsuits against fraudulent investment professionals.
Finally, if you think you have been a victim of investment fraud, take action immediately. Contact a securities litigation attorney as soon as possible to discuss your options. Your attorney can also help you report the scam to local and state securities regulatory authorities and other law enforcement agencies. In addition, your attorney may recommend filing a complaint with the FBI’s CyberTips hotline and your state’s consumer protection agency. In the case of a multi-million dollar scam that targeted older investors, federal prosecutors successfully secured eight convictions in connection with a bogus investment scheme involving stock in a sham company claiming to develop cutting-edge electric and natural gas cars.