Securities Fraud Attorney

Over 51 million Americans own some type of traded stock and approximately 200 million own securities indirectly. While the financial markets open opportunities for many to obtain wealth, they also afford white-collar criminals the ability to take advantage of unwary investors. It is estimated that in the U.S. civil securities fraud, also known as investment fraud or stock fraud, amounts to about $40 billion per year.

Events such as the Enron collapse of the early 2000s and, more recently the backdating scandal of 2006 and the sub prime crisis that came to a head in 2008, have brought the issue of securities fraud to the forefront. But the problem pervades at all levels of the financial spectrum, and is expected to increase in light of the ever more complex financial instruments that continue to be created.

Generally speaking, however, securities fraud essentially amounts to deceptive practices that induce investment decisions based on false information. These practices include the likes of lying to corporate auditors, publishing false information on companies' financial statements and Securities and Exchange Commission (SEC) filings, stock manipulation schemes, insider trading, and outright embezzlement by stockbrokers. Most securities fraud activities can be categorized into the following types:

• Corporate fraud - corporate fraud cases will likely increase due to the sub prime mortgage crisis.
• Internet fraud - most commonly involve pump-and-dump schemes in which false information about a thinly traded stock is disseminated in forums, chat rooms, internet boards, and spam emails to increase the price of the stock ("pump"), which the perpetrators own. After the artificial run up, they sell the stock at a profit ("dump"), sticking the unwary buyers with the ensuing losses.
• Insider trading - some trading of a company's stock or other securities by the company's officers, directors, key employees, and holders of more than ten percent of its shares is illegal due to the advantage they enjoy of their access to company information that is not publicly available.
• Microcap fraud - stocks of companies with under $250 million market capitalization are fraudulently sold to the public. Such stocks lend themselves readily to pump-and-dump and boiler room schemes, and are often sold as "penny" stocks (for less than $5 per share).
• Accountant fraud - mostly involves falsification of corporate financial reports that give misleading impressions of their financial status.
• Boiler rooms - these are brokerages that pressure their clients to trade, often through telesales, and usually by engaging in microcap fraud. Securities sold in boiler rooms often include private placements and commodities in addition to microcaps. Boiler rooms also frequently fail to disclose additional profitable arrangements associated with these transactions.
• Mutual Fund fraud - include deceptive practices such as market timing and late trading.
• Short Selling Abuses - includes certain types of naked short selling in which stocks are sold without any intent to borrow, and the practice of "short and distort", which is roughly the converse of pump-and dump.
• Ponzi schemes - operations in which investors are promised unusually high returns out of investment by subsequent investors, rather than from actual revenues generated by genuine business activity.

Securities fraud lawsuits are on the increase. In fact, related class action lawsuits increased 43 percent between 2006 and 2007. If you suspect that you are the victim of securities fraud, you should consider consulting with a qualified securities fraud attorney.