What is Securities Fraud and How a Lawyer Can Help You
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What is Securities Fraud and How a Lawyer Can Help You

If you own stocks, it’s critical that you know what’s involved in securities fraud. Also known as investment fraud or stock fraud, securities fraud is a deceiving practice in which sales or purchase decisions are made based on false information.


Perhaps you’re unfamiliar with the term, “securities fraud”, but you’ve heard of the downfall of the American energy company known as Enron. This disaster, which occurred in 2001, was partially the result of deceptive accounting practices in which the company was highly overrated, which led to stock prices becoming inflated. As a result, Enron investors and shareholders suffered significantly. When you don’t understand the common warnings signs of securities fraud, it’s easy to become a victim. Here’s what you need to know about securities fraud and how a securities fraud lawyer can help you.


Types of Securities Fraud

There are three main categories of securities fraud:

Misrepresentation/omission is a type of securities fraud that entails an investor being deliberately deceived, regarding information about a security. When brokers fail to notify clients of any risks linked with stocks, they’re failing in their responsibilities.


Overconcentration involves a broker intentionally not diversifying the portfolio of a client. For a client’s assets to be protected, it’s important for brokers to vary the variety of stocks that are bought. In other words overconcentration of an investment can be detrimental to clients. Fortunately, a good securities fraud attorney is able to help investors recover from this kind of loss.


Churning is a serious kind of securities fraud that’s designed for increasing a broker’s fees. This is a situation in which many stocks are traded that are not in the best interests of a client, such as selling stocks that don’t have large gains in an effort to show profits. It’s usually done by individual brokers even though, in some cases, it can involve an entire brokerage firm.


Unsuitability securities fraud is another serious type of securities fraud. This is when a broker consciously suggests stocks that are outside of the risk tolerance of a client. This type of securities fraud is particularly damaging to senior citizens because it can destroy a huge part of an older person’s retirement savings at the time when financial security is most needed.


Common Warnings Signs

It’s importance to recognize the common signs of securities fraud that could suggest that you may be a victim.

  • Be suspicious if the transactions of your statements don’t seem logical.
  • If you see transactions that you didn’t authorize, there could be a problem.
  • If most of your investments that your broker recommends appear to be going down in value, there could be fraud involved.
  • Be cautious when your broker doesn’t share pertinent information about an investment purchase.
  • Another red light is a broker failing to return your calls.
  • Furthermore, be leery when you’re losing money during an “up” market.
  • Noting a huge drop in stock value within a very short time period can be a clue that something isn’t quite right.


How a Securities Fraud Attorney Can Help You

Although these warning signs may not indicate that you’re victim of securities fraud, it’s still a good idea to promptly seek legal counsel from a highly qualified and experienced legal professional who knows how to properly manage investment fraud.

  • A securities attorney can help you detect the common signs of investment fraud, besides what to you need to watch, regarding your investments.
  • Your lawyer can recommend the various kinds of claims that are available to people who’ve undergone losses that aren’t the result of normal market factors.
  • What’s more, a securities lawyer is able to properly represent your case in litigation that may arise from your investments, such as a class action suit.

You don’t have to remain financially injured by securities fraud. If you feel you may be a victim, don’t hesitate to set up an appointment with Aiman-Smith & Marcy. Our high-performance, boutique law firm has a well-deserved reputation of getting rid of unethical business practices by large corporations on their employees, consumers and businesses. Please contact us and learn more about our wide range of legal services.