Business Law: Defining Securities Fraud

Securities fraud is a crime that involves deceit, manipulation, or insider trading in the purchase or sale of securities. The goal of securities fraud is to make money through wrongful means.

For those who are caught or suspected of the crime, there are criminal attorneys in Los Angeles who can help fight the case.

There are a few key elements to securities fraud. First, there must be a sale or purchase of securities. Second, the seller or purchaser must engage in some type of deceit, manipulation, or insider trading. Finally, the goal of the fraud must be to make money.

Securities fraud can be difficult to prosecute because it often requires proving intent to defraud. This can be difficult to do, especially if the defendant claims that they were just trying to make a profit.

Let us then define some of the terminologies of securities fraud below.


Insider Trading

Insider trading is the buying or selling of securities based on information that is not available to the general public. This information could be something like upcoming earnings announcements or a merger deal. Insider trading is illegal because it gives some investors an unfair advantage.

To say a little more about insider trading, it is a form of securities fraud that can only occur because someone has special knowledge about a company and then uses that information to their advantage when trading securities. This can involve buying or selling securities based on this information or passing it along to others who might trade securities based on it.

Pump and Dump

Another example of securities fraud is something that is known as a pump and dump. This involves artificially inflating the price of a security through false or misleading statements. Once the price is inflated, the perpetrators will sell their shares at a profit. This leaves investors who bought at the higher prices holding securities that are worth less than what they paid.

This is deceitful and fraudulent and all about illegally making gains from others who are going to lose out. The whole point of the law is to protect unsuspecting and honest investors who may fall victim to such a scam and convict those who have done this to their advantage.

Pyramid Scheme

A pyramid scheme is a type of securities fraud that involves promising investors high returns based on the money invested by new investors. The problem with pyramid schemes is that they eventually collapse because there are not enough new investors to keep the scheme going. This leaves early investors with worthless securities.

Fraud is committed because of the structure of the scheme, especially if it is knowingly set up to fail many investors whilst lining the pockets of others in the know. The many regulations that exist within the financial sector are upheld by laws and guidance on the procedures that should be followed in the name of honesty.

Legal Representation

When any of the above crimes are detected, they will lead to the perpetrators being arrested and expecting a criminal trial. This is where it is important to have specialist legal representation to defend such actions. It is very likely that they will have jail time if found guilty. It must be proven, however. This is where experienced securities fraud lawyers can prove a good investment.

The consequences of being convicted of financial fraud will mean that it will be extremely difficult to ever get a job again in the financial sector or one that involves handling or taking care of the money of another.

Securities represent a significant part of financial trading and so laws are required to prevent fraudulent activities. It is all about protecting the investors, who are not necessarily experienced and so need to trust others to manage their financial affairs for them.

If you find yourself in the position of having been tempted, and then accused of financial irregularities, you will need an experienced criminal defense lawyer to help you navigate the legal system that you now find yourself in.


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