Tennessee Defense Attorneys Fighting for Clients Facing Federal Charges of Securities Fraud
Comprehensive counsel for brokers, RIAs and firms in Sevier County, the Tri-Cities, Greeneville and throughout East Tennessee
Securities fraud involves manipulating investors to purchase or sell stocks and/or securities for deceptive purposes. It also includes deceptive trading practices, investment schemes, and withholding or misrepresenting information from investors. Enron’s insider trading scandal, Bernie Madoff’s Ponzi scheme, the housing collapse highlighted in The Big Short: all of these are famous examples of acts of securities fraud. If you or company is facing federal charges of securities fraud, contact Delius & McKenzie, PLLC. We uphold the rights of investment professionals and business owners throughout East Tennessee, including those in Sevier County, the Tri-Cities region and Greeneville.
Penalties for conviction for federal charges of securities fraud
Depending on the type of fraud charges you face, you may be fined anywhere between $10,000 and $5 million per offense. You may also be incarcerated for up to 25 years per offense. It is inevitable that you will be forced to pay restitution to the investors, or anyone who sustained damages, for the amount that was stolen from them. Please note that even if your fines are relatively low in criminal court, investors may be able to sue you in the civil court system. This means additional fines and fees, and a conviction in either court means the potential loss of your professional license.
What constitutes securities fraud?
Brokers and investment firms owe their investors a duty of care. RIAs, or registered investment advisors, owe their clients a fiduciary duty. To put this in the simplest terms, investment firms, brokers and RIAs must put the good of the investor first. They have a duty to make suitable claim suggestions that are in line with what the investors’ needs and goals are, and to ensure that, should a problem arise, their clients are notified. Managers and supervisors are also required to monitor activity by their brokers, to ensure that they are in compliance at all time.
When an advisor or broker engages in duplicitous behavior, attempts to manipulate stock prices, offers advice that is intentionally counterproductive or harmful to an investor, or engages in criminal activity, that advisor or broker can be charged with securities fraud. If the investment firm did not stop the broker or advisor from behaving in such a way, or was actively engaged in the act, then the firm itself may be charged with securities fraud.
Common examples of securities fraud
An advisor who makes a mistake, or recommends a bad investment, isn’t necessarily breaking the law; sometimes, advisors and brokers are wrong. But when an advisor or broker intentionally makes recommendations, purchases or sales that are designed for his or her financial gain, as opposed to the client’s, then he or she may be charged with a crime. The most common examples of this behavior include:
- Misrepresentation, or failing to give investors necessary information about the stock or commodity, the fees and the risks
- Insider trading, where a person uses knowledge about a stock, commodity, company or industry – knowledge that is not yet public – in order to make money through sales or purchases
- Hedge fund fraud, wherein investors are not told upfront the risks of investing, nor are they able to take their money out when they wish
- Credit default swaps, which has investors betting that a particular investment will go into default, allowing them to make money on the loss
- Churning, or excessive trading to generate fees
- Unauthorized trading, or making trades without the investor’s permission in order to generate fees and bonuses
- Pyramid schemes, which rely on multiple investors in order to generate money
- Mortgage fraud, where lenders loan money to individuals who wish to buy a home, knowing those individuals could not afford to repay them
Federal charges of securities fraud
In order to be charged with securities fraud at the federal level, you must be accused of violating a federal law – namely, the Securities Exchange Act of 1934. Under 18 U.S. Code § 1348:
“Whoever knowingly executes, or attempts to execute, a scheme or artifice—
- To defraud any person in connection with any commodity for future delivery, or any option on a commodity for future delivery, or any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)); or
- To obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any commodity for future delivery, or any option on a commodity for future delivery, or any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d));
shall be fined under this title, or imprisoned not more than 25 years, or both.”
Because most accusations of securities fraud take place in civil court, and because these cases take a very long time to build and prosecute, the federal government does not charge individuals or institutions with fraud that often. Therefore, if you have been subject to an FBI or DoJ investigation, or if you believe that federal charges are imminent, you should immediately seek legal counsel. The federal government only pursues cases it thinks it will win; you want an experienced federal defense attorney by your side as quickly as possible.
Defending East Tennessee clients against federal charges of securities fraud
Delius & McKenzie, PLLC represents individuals, investment firms and corporations accused of engaging in securities or commodities fraud. If you are facing federal charges of fraud, it’s time to call 865-428-8780, or fill out our contact form, to speak with an aggressive defense lawyer. From our offices in Sevierville, we proudly serve clients in Bristol, Johnson City, Kingsport, Greeneville, Seymour, Gatlinburg and Pigeon Forge, and throughout East Tennessee.