Los Angeles Federal Securities Fraud Lawyer

Los Angeles, CA Federal Securities Fraud Attorney

If you or your organization is facing an SEC investigation, you may be feeling overwhelmed and unsure about what steps to take next. Criminal prosecution by the federal government can lead to severe penalties, including fines and years in prison. Therefore, if you suspect that you are under investigation by the SEC for securities fraud or related crimes, it is critical to get in touch with a dedicated Los Angeles federal securities fraud lawyer from the Law Offices of Marc S. Nurik.

At the Law Offices of Marc S. Nurik, our federal securities fraud team has years of experience representing clients who are targets of the SEC and facing penalties for violations of the Foreign Corrupt Practices Act (FCPA), the Securities and Exchange Act of 1934, and the Dodd-Frank Act. If you are facing federal criminal charges for securities fraud from the DOJ, we can help you work toward having your charges dropped or minimized. A qualified lawyer is crucial for mounting a successful defense.

Understanding the Types of Securities

Securities are a common term deployed in the financial world, and they make up the backbone of transactions within the economy. They are financial tools that serve to represent a creditor relationship with a government agency or enterprise or equate to a claim of ownership. The most common types of securities are the following:

• Bonds are also known as debt securities, and they are representative of a debt obligation from the issuer. If an investor purchases a bond, they are essentially lending assets to the bond issuer. The issuer could be a corporation or government agency in need of quick cash. In return, the investor gets interest payments and the return of the principal in full. While bonds offer fewer returns than stocks, they are considered to be lower-risk securities.
• Stocks, otherwise referred to as equity or shares, are representative of owning a part of a corporation. If an investor purchases equity in a company, then they are a shareholder who has the right to claim a part of the earnings and assets of the company. In addition to financial ownership, shareholders can receive dividends and voting rights on important company decisions.
• Derivatives are a complex form of security, and understanding such financial instruments requires substantial financial experience and background. Such securities are often implemented for speculation, gaining leverage, or hedging risk, and examples are futures contracts and options. This form of security has a derived value from an underlying rate, index, or asset.
• Preferred Stocks. Preferred stocks are considered to be a mixture of bonds and stock, and holders own part of a corporation’s earnings or assets but on a fixed dividend rate. If the company is liquidated, then preferred stockholders are paid out before common stockholders.

Mutual funds and exchange-traded funds, or ETFs, are a type of investment strategy that brings funds together from different investors to put the money into a diverse portfolio of bonds, stocks, and other types of securities. Mutual funds are considered to be more of a stable investment vehicle, with less likelihood for volatility. If a person invests their money into a mutual fund or ETF, they are rewarded with fund shares equivalent to their ownership interest.

When working to understand securities exchange fraud, it is critical to understand the fundamentals of securities. Securities are key players in the economy that allow for companies and governments to access funds for certain reasons. They also allow investors to work toward specific financial objectives.

The Securities and Exchange Commission regulates the trading and issuance of securities in order to make sure that investors are protected from fraud or deception and that the financial markets are balanced and transparent.

What Are the Federal Securities Fraud Laws?

There are multiple regulations and laws making up the rules that oversee securities transactions in the United States. The focus of federal securities fraud laws is to work against fraudulent activities occurring in securities markets. Some key components that make up laws governing the federal securities exchange, in terms of importance and chronological order, include:

• The Securities Exchange Act of 1934. This act was set into motion following the 1929 stock market crash and seeks to regulate over-the-counter markets and securities exchanges. Furthermore, this act established the Securities and Exchange Commission, or SEC, to ensure that securities laws are being enforced.
• Section 10(b) of the SEA and Rule 10b-5 of the Securities Exchange Act. These sections are particularly specific to securities fraud cases and outlaw the use of deception or manipulation when selling or purchasing securities. Specifically, Rule 10b-5 lays out certain activities that are known as being fraudulent, including deceptive practices such as insider trading and making false statements.
• The Securities Act of 1933. This act engages with the primary offering of securities to the public and makes it mandatory for enterprises to make critical information available to investors. The Securities Act of 1933 makes fraudulent activities that have to do with securities issuance unlawful.
• The Sarbanes-Oxley Act of 2002. This act was drafted and implemented into law as a reaction to certain accounting issues with large companies, such as WorldCom and Enron, and made certain regulations regarding financial disclosures and corporate governance. Under this act, public accounting firms, public company boards, and management saw new requirements.
• The Dodd-Frank Wall Street Reform and Consumer Protection Act. This act entered into effect in 2010 and resulted in widespread changes in financial market regulation. New regulatory oversight and whistleblower protocols were introduced, and investor protection and systemic risk issues were addressed.

In addition to the regulations and laws mentioned above, there are multiple statutes and provisions that specifically address the crime of insider trading. Insider trading is the practice of trading securities on the basis of non-public information that must either (a) be known by all relevant parties before trading or (b) the trading should not take place given the known secret information.

When it comes to enforcing federal security exchange laws, the SEC is a central investigator to determine whether or not such statutes have been violated. If the SEC determines that laws have been broken, they can then bring forward penalties. In the case that criminal activities have taken place, the Department of Justice can bring forward criminal charges.

Is Securities Fraud Covered Under California Law?

Securities fraud can be prosecuted under state law. The Corporate Securities Law of 1968 regulates the sale of securities within California. It requires that any securities sold be qualified with the commissioner of corporations or be exempted from registration.

Exemptions do not shield issuers from fraud liabilities (criminal or civil). Exemptions simply waive the need for commissioner approval. This can save time and money. The Corporate Securities Law of 1968 governs sales by issuers and secondary sellers.

As with federal laws, the Corporate Securities Law of 1968 aims to safeguard the public from fraud in securities transactions. It also offers legal remedies that can provide relief for those harmed by unlawful transactions. For example, people who were defrauded by someone who violated the state white-collar crime law can sue the at-fault party under the provisions of this law.

If criminal acts were committed, the state attorney general or a county district attorney could seek criminal charges against the person who engaged in securities fraud.

Punishment and Sentencing for Federal Securities Fraud in California

In the fiscal year of 2020 alone, over 64,000 securities fraud cases were reported to the US Sentencing Commission. However, since 2016, securities fraud has been found to have decreased by 35%. Of those convicted of federal securities fraud crimes, the associated penalties are serious, with lengthy sentencing measures and fines of up to millions of dollars.

For convicted offenders of securities and investment fraud, the average time spent in prison is 46 months, or roughly 3.8 years. Of all of those who were convicted, over 85% had to spend time in prison. In terms of financial losses, the median loss was over 2 million for convicted offenders, in which approximately 12% lost less than $250,000 and 18% lost more than 9.5 million.

Sentencing decreased for convicted individuals who were found to have played a small or minor role in the securities or investment offense. If the extent of financial harm done was far-reaching or impacted multiple victims, then sentencing measures were more severe. Further factors that can increase sentencing Hearings include having a supervisory or leadership role in the financial offense or taking advantage of a public position of trust.

Obstructing or impeding justice, hiding or executing the means of an offense using sophisticated measures, or violating a commodities or securities law as a broker, dealer, financial adviser, or director or officer of a publicly traded company can also severely increase sentencing and overall punishment for securities fraud.

In addition to the criminal penalties imposed for a conviction of a securities fraud crime, the damages to your reputation can be long-lasting. Even if you are only under investigation and no charges come of it, certain business partners may no longer want to engage with you, and the repercussions could have a serious impact on your career and even personal life. Therefore, it’s important to hire a federal criminal defense lawyer immediately to protect your rights and your reputation.

FAQs

Q: Is Securities Fraud a Federal Crime?

A: Under the federal criminal code, anyone who, under false or fraudulent pretenses, purchases or sells securities can be charged with this federal crime. If convicted, a defendant facing charges of securities fraud faces fines and up to 25 years of prison time. When prosecuted under federal law, the Department of Justice often prosecutes the case. Securities fraud can also be handled as a civil matter.

Q: Who Can Sue for Securities Fraud?

A: Securities fraud cases can be criminal and civil. In civil cases, the Securities and Exchange Commission (SEC) stands in as the plaintiff. Victims of securities fraud may also have standing in these cases if they were defrauded by the investor. Anyone with knowledge of securities fraud can notify the SEC so that the agency can begin investigating allegations of securities fraud.

Q: What Is the Law for Securities Fraud in California?

A: Securities fraud is covered by both federal and state laws. In California, the Corporate Securities Law of 1968 regulates the sale of securities. This law prohibits the sale of securities through false or misleading statements. Investors who were defrauded may sue under the state law.

The state attorney general in California can investigate criminal securities fraud that occurred under the state’s penal code. Local county district attorneys also investigate potential cases of securities fraud.

Q: What Are the Federal Sentencing Guidelines for Securities Fraud?

A: Under federal law, securities and commodities fraud may be punishable by fines and imprisonment of up to 25 years upon conviction. The Department of Justice (DOJ) handles federal prosecutions. Securities could be stocks, bonds, mutual funds, certificates of deposits, exchange-funded trades, and annuities.

If the defendant is found guilty, the judge will consider the defendant’s criminal background (if any exists), the value of the fraud, the presence of aggravating factors, and other considerations when determining the sentence. First-time offenders are rarely given the maximum sentence, although there is no way to predict how a judge may rule.

Get the Support of a California Federal Securities Fraud Lawyer Today

Whether you have a suspicion that you are under investigation by the SEC or are facing charges from the SEC in California, it is important to get in touch with a securities fraud attorney as soon as possible. A lawyer can help you fight your charges and avoid having to pay large penalties or even face time in prison.

At the Law Offices of Marc S. Nurik, our dedicated legal team can take the time to understand the specific details of your case, address your questions and concerns, and help you craft an optimal defense strategy to minimize the potential damages. Reach out to a federal securities fraud lawyer from our California law firm today.