Securities Fraud

Securities fraud in Los Angeles is a white collar crime that can result in lengthy prison sentences for those convicted. Like many other fraud offenses, securities fraud involves misleading investors or other people in order to get them to invest in a company or purchase stock despite knowing that the stock or company is nonexistent or worthless.

There are a number of different types of securities that are covered under the securities fraud laws. These include stock in a company, a note reflecting money owed to a person by a company, a certificate establishing a profit-sharing arrangement or a partner’s interest in a limited liability corporation or partnership.

There are a number of ways that a person can commit securities fraud. Under the law, it is illegal to sell unqualified securities. Prior to selling stock or other securities, one must have the securities qualified with the California Department of Corporations. This involves a significant amount of paperwork. Failure to properly qualify a security can lead to prosecution for securities fraud.

The law allows small businesses to sell unqualified securities without penalty. A person would not face criminal penalties for selling unqualified securities if the following conditions exist: the defendant sold securities to 35 people or less (a husband and wife couple counts as one person), all parties who purchased securities did so without the intent to resell, the sale of securities was not publicized and everyone who purchased securities either had a previous personal or business relationship with the seller or had significant business experience.

A person could also be criminally liable for securities fraud if the securities sold are not consistent with the information included in the qualification filings. It is also illegal to make false or misleading statements in order to induce someone to purchase or sell securities. It is illegal to make false statements in order to buy or sell a security. It is also unlawful to fail to disclose pertinent facts that would affect the price of the security.

One of the most common forms of securities fraud is insider trading. Insider trading involves using information that is not generally known to the public in order to gain an unfair advantage in buying or selling securities.

In California, securities fraud is a “wobbler” offense that can be charged as either a felony or a misdemeanor. If the defendant is convicted of willfully selling securities that do not comply with qualification requirements, he or she can be sentenced to up to three years in prison and up to $1,000,000 in fines. If the defendant engaged in market manipulation, made false statements in connection with a securities transaction or was involved in insider trading, he or she can be sent to prison for up to five years and may be ordered to pay up to $10,000,000 in fines.

In many cases, securities fraud cases are investigated by the Securities and Exchange Commission and charged in Federal Court by the United States Attorney’s Office. The penalties in Federal Court are often significantly more severe than those imposed in California prosecutions, and a person who is convicted of securities fraud in Federal Court can be sentenced to serve up to 20 years in Federal prison. In addition, someone convicted of securities fraud can be subject to civil lawsuits.

It is important to remember that securities fraud offenses require a showing that the defendant engaged in willful conduct in order to gain an unfair advantage. If the defendant’s actions were unintentional, he or she would not be guilty of securities fraud.

If you have been charged with securities fraud in either state or Federal court, or if you are under investigation for a securities fraud offense, it is absolutely critical that you discuss your case with a Los Angeles Criminal Defense Lawyer as soon as possible. Los Angeles Criminal Defense Lawyer Michael Kraut is a former Deputy District Attorney with over 14 years of prosecutorial experience who previously prosecuted white collar crimes as part of the elite Major Fraud Division. Mr. Kraut is highly skilled at defending securities fraud cases both in state and Federal Court. Mr. Kraut works hard to ensure his clients receive the most thorough representation possible.

For more information about Los Angeles securities fraud, and to schedule your free consultation, contact Los Angeles Criminal Defense Lawyer Michael Kraut at the Kraut Criminal & DUI Lawyers located at 6255 Sunset Boulevard, Suite 1520, Los Angeles, CA 90028. Mr. Kraut can be reached 24/7 at 888-334-6344 or 323-464-6453.