The U.S. Securities and Exchange Commission (SEC) has aggressively enforced federal securities laws throughout California, including in Monte Sereno. This has not just resulted in a disproportionate number of civil and criminal allegations of securities fraud in the region; it has also meant that companies in the area have had to spend extra time, care, and resources on complying with the often nuanced and extremely complex laws that regulate the sale of securities.
That is why the securities fraud defense lawyers at The Criminal Defense Firm have made a point of establishing a strong connection to the community in Monte Sereno, California. With our strong advocacy and experienced legal guidance, numerous regulated securities professionals and their brokerage firms have insulated themselves from civil or criminal liability and defended against allegations of wrongdoing.
The Federal Laws that the SEC Enforces
The SEC is the federal law enforcement agency that is tasked with administering a wide variety of federal securities laws, including the:
- Securities Act of 1933
- Securities Exchange Act of 1934
- Dodd-Frank Act
- Sarbanes-Oxley Act
- Foreign Corrupt Practices Act (FCPA)
However, these laws are not the only rules that the SEC enforces. Many federal securities laws give the SEC the power and authority to promulgate regulations that are supposed to allow the agency to better enforce the law. However, some of those same regulations arguably go further than the laws authorize them to go. Worse, many of these laws and the regulations that they have spawned are written in vague ways that are designed to catch novel, but not explicitly illegal, conduct. This makes complying with the law even more difficult and increases the odds that regulated securities professionals will face SEC scrutiny or even an SEC enforcement action.
Some Examples of SEC Fraud
Like most other types of fraud, there are a wide variety of ways to commit securities fraud. Additionally, novel courses of deceptive conduct are invented all the time. However, most deceptive schemes involving securities fall into one of the following categories.
Using deceitful misconduct to influence the markets and raise or lower stock prices and the costs of other types of securities is a type of SEC fraud. Also known as stock fraud, markets can be manipulated in a variety of ways to wrongfully increase the perpetrator’s profits. A few examples include:
- Pump and dump schemes, where lots of shares in a company are bought up in order to inflate its price, and then sold at the higher price after other investors see the increase and jump on board
- Spreading misinformation about a company in order to alter its stock prices
- Wash trading, where an investor buys and sells a company’s securities solely to increase its transaction rate and spur the interest of other investors
Omissions and Misrepresentations
Companies can commit SEC fraud by omitting or misrepresenting information about themselves in order to draw investors. Debts held by the company can be left out of marketing materials soliciting investment or revenue streams can be altered to make them seem better than they really are. In either case, investors are duped into making trades that they would not have made, had they had all of the information.
Regulated securities professionals like broker-dealers have strict rules that they have to comply with. One is that they can only trade securities in a client account if they have that client’s consent or authorization to do so. Buying or selling securities without the client’s authorization is unauthorized trading.
While this might seem like a simple example of SEC fraud, it can be difficult to comply with because of the nature of authorization in the securities field. Broker-dealers are expected to make trades that maximize their client’s returns. This may require quick decisions and actions. Client accounts, however, may have strict limitations on the authority of the broker-dealer. When these issues conflict, it puts the broker in a difficult position.
Insider trading is the crime of trading securities based on material information that is confidential or non-public. It is one of the only federal crimes to be based not on a statute passed by Congress, but on an SEC regulation – SEC Rule 10b-5.
Individuals convicted for insider trading face up to 20 years in prison and $5 million in fines. Corporate entities convicted for it face up to $25 million in fines.
Mutual Fund Fraud
SEC fraud can also be done through mutual funds. Known as mutual fund fraud, some common fraudulent schemes are:
- Churning, where a broker makes trades in a client’s account to increase transaction fees rather than to further the client’s financial goals
- Prospectus fraud, where material information is misrepresented or omitted from the fund’s prospectus
- Front running fraud, where a broker knows of large transactions from a mutual fund that are about to be made and completes transactions based on that insider information before they go through
Also a form of theft, embezzlement is a common allegation of securities fraud when it is done by a broker-dealer or firm. The crime involves pocketing money or property that had been entrusted to the perpetrator. In the securities context, it is often money that has been entrusted by a client to their broker for making investments, but then the broker uses the money for their personal gain.
Common Targets for SEC Enforcement Actions
Particularly in Monte Sereno, California, and into the Silicon Valley area, certain industries have attracted the attention of the SEC more than others, often because enough stakeholders and entrepreneurs have solicited investment in their startups in fraudulent ways. Some of these industries are in:
- Social media
- Mobile apps, particularly mobile trading apps
- Pharmaceutical and other healthcare initiatives
- Cannabis-related products
While these areas have seen more SEC enforcement actions than others, that does not mean that companies outside of these industries will never have to deal with the SEC in Monte Sereno, though.
Frequently Asked Questions About SEC Fraud in Monte Sereno and The Criminal Defense Firm’s Legal Representation
What Can Trigger an Investigation for SEC Fraud?
SEC investigations can start in several different ways.
One common trigger is in public filings from a securities issuer. If they do not match information that the SEC has, the agency will likely look into the discrepancy. If suspicious signs are found, the investigation will continue and get more intrusive.
Another common trigger is a whistleblower. Whether they come from within the company that is allegedly committing securities fraud or from a competitor, information that they provide to the SEC can trigger an investigation into wrongdoing.
What Should I Do if I am Under Investigation by the SEC?
The most important thing to do if you learn that you are under investigation by the SEC is to quickly hire an experienced SEC fraud defense lawyer. Getting a lawyer on your side right away is essential because the early stages of an investigation are when the investigation is at its weakest. Evidence is only just beginning to get uncovered, so tactfully dealing with investigators and presenting exculpatory evidence to show that a further investigation is worthless is often an option. Even if it is not, an experienced securities fraud defense lawyer will know how to invoke your rights during the investigation in ways that you may not have considered.
What Makes The Criminal Defense Firm Different from Others?
There are several things that make The Criminal Defense Firm different from other securities fraud defense firms.
One of them is the fact that The Criminal Defense Firm is composed entirely of senior-level lawyers and investigators. This means that you will be represented by attorneys who have numerous years of experience handling cases similar to your own. They will know what to expect in your case and know which pitfalls to avoid.
However, it also means that, unlike at other firms, all of the work in your case will be done by experienced lawyers, rather than delegated to paralegals or junior associates who have just passed the bar exam. That is what most other SEC fraud defense firms do: Even if you hired a firm for the experience of the senior attorneys or partners, those experienced lawyers will still delegate the work in your case to junior associates who have only just started to practice the law. The oversight that the senior lawyers will have over these lawyers may be strict, but it may also be very hands-off. In many cases, you may not see the lawyer that you wanted to represent you until the very end of your case.
That does not happen at The Criminal Defense Firm because our staff is composed solely of senior-level attorneys. The lawyers whose experience drew you to our firm will be the lawyers who represent you throughout your case and who will perform all of the work on it.
Why Doesn't The Criminal Defense Firm Call Itself the Best SEC Fraud Defense Firm in Monte Sereno, California?
That is something that we prefer to let our prior clients’ testimonials say about our firm.
Reach Out to the SEC Defense Lawyers at The Criminal Defense Firm in Monte Sereno, California
Whether you have been formally accused of SEC fraud, learned that you are under investigation by the SEC, or merely want to ensure that you are taking adequate compliance efforts so that you will not attract undue attention by its agents, you need an experienced SEC fraud defense lawyer.
Call The Criminal Defense Firm at (866) 603-4540 or contact them online to get the legal help and guidance that you need in Monte Sereno, California.