Santa Clara, California, has been the site of aggressive enforcement of federal securities laws by the U.S. Securities and Exchange Commission (SEC), mainly because of the high concentration of leading tech companies and startups in the region.
That is why The Criminal Defense Firm provides local and exceptional legal representation to individuals and businesses in the Santa Clara region. With The Criminal Defense Firm’s guidance and advocacy both inside and outside of the courtroom, numerous suspects and defendants in and around Santa Clara have beaten or resolved allegations of SEC fraud.
Types of SEC Fraud That The Criminal Defense Firm Handles
SEC fraud can happen in a variety of ways, and new methods of using securities to defraud people and investors are created all the time. The Criminal Defense Firm has helped suspects clear their name when they have been accused of committing any of these types of SEC fraud, including:
- Insider trading
- Selling unregistered securities
- Market manipulation
- Mutual fund fraud
- Excessive fees
- Short selling abuse
With our defense attorneys’ prior experience working within the SEC and as federal prosecutors of white collar crime and financial fraud, we have built a reputation for aggressive and successful defense strategies.
It is securities fraud to trade based on material, nonpublic information. Doing so can amount to the crime of insider trading.
Contrary to what many people think, you can be an “insider” even if you do not work for the company in whose shares you have traded. All that matters is whether the information you relied on when buying or selling stocks or bonds was important and unavailable to the wider public at the time of your transaction. Cases abound of people learning about a company’s internal workings from corporate executives or their associates and then using that information to buy or sell stock in the company. These cases, which can lead to civil or criminal liability for both the tippee (for using the information) and the tipper (for disclosing it), can lead to insider trading allegations against people who are completely unrelated to the company at issue.
Legitimate corporate insiders, like company executives and high-level employees with an intimate understanding of the company’s direction and future, frequently face insider trading allegations based on little more than when the trade was made. Transactions made right before important news comes out can lead to an investigation even when no other incriminating evidence is available. Many corporate insiders, therefore, have to rely on pre-arranged trading plans, also known as Rule 10b5-1 trading plans, to forestall an intrusive investigation.
Sale of Unregistered Securities
Selling securities without registering them with the SEC first, or having a valid exemption to the registration requirement, can lead to allegations of SEC fraud and unauthorized trading. Recent developments in securities law, particularly with regard to cryptocurrencies, have made this offense more complicated to prove. Authorities have to show that the sale constituted an “investment contract,” though this term has become more and more obsolete and no new definition has replaced it.
Regulated securities professionals and business insiders stand to make huge profits if they can manipulate the markets and make stock prices rise and fall when they want them to. Manipulating the market with the intent to capitalize on it with securities transactions, however, is a type of SEC fraud.
There are dozens of ways to commit market manipulation. Just a few are:
- Pump-and-dump schemes, where shares in a company are bought in bulk to pump its price and then sold, or dumped, in bulk to capitalize on the higher price created by others who have bought into the company since the price was pumped upwards
- Spreading false information about a company to profit on the rise or fall in stock price
- Bear raiding, where the manipulator shorts a company’s stock and then sells its shares in that company in bulk, lowering the share price and spooking others into selling their shares, as well
- Wash trading, where the manipulator repeatedly buys and immediately sells stock in the same company in order to inflate its transaction volume and attract interest in the company’s stock
Mutual Fund Fraud
Mutual funds are large pools of assets from a variety of investors. This makes them prime targets for fraudulent activity. A couple examples of mutual fund fraud are:
- Front running, where a broker knows about an upcoming bulk transaction to be made by the manager of a mutual fund and buys or sells right before that big move is made
- Late trading, where transactions are made after-hours using new information but recorded before the fund calculates its daily net asset value
- Omitting or misrepresenting information in the fund’s prospectus
Regulated securities professionals, particularly broker-dealers, can face allegations of SEC fraud if they use deceptive or overly complex fee structures or just overcharge their clients. A few examples include:
- Account churning, where pointless transactions are made in a client’s account in order to increase the fees
- Breakpoint fraud, where the broker does not inform the client about volume discounts offered by mutual funds for making purchases over the breakpoint
Short Selling Abuse
Firms frequently short an issuer’s securities, betting that they will go down. Short sellers do this by borrowing securities in a company, selling them on the market, then repurchasing them in order to return them to their original owner. If the price is lower on the repurchase, the short seller profits.
Some ways to short the market, though, can amount to fraud, like:
- Naked short selling, where the shares are sold without being borrowed first
- Short and distort schemes, where false rumors are propagated about a company right after it has been shorted
Like many other white collar offenses, the potential penalties for SEC fraud depend on a lot of factors, including:
- The defendant’s criminal history
- The amount at issue
- Whether there was a specific intent to defraud
- Whether the fraud implicated a federal source of money
The issue of intent alone can make the case a crime or just an administrative offense. If there was an intent to defraud, defendants can face decades in prison. Additionally, securities fraud is notorious for becoming a multi-count offense: For example, if you used the internet to commit the offense you would face charges for wire fraud in addition to the charge for the underlying fraudulent conduct. The wire fraud charge, alone, carries up to 20 years in prison.
Frequently Asked Questions About The Criminal Defense Firm and SEC Fraud
Are There Different Types of SEC Enforcement Actions?
Yes, the SEC can initiate three different types of enforcement action:
Administrative actions are for low-level violations and are held entirely within the agency. These cases are not trivial, though. If you are found in violation of federal securities law, you could face substantial fines and could even be permanently barred from trading securities.
Civil cases are for more serious violations that were done without the requisite intent to defraud someone else. These go to court, so the judge is not an SEC insider, but the penalties are significantly higher. Defendants can face huge civil fines for their conduct.
Criminal cases are the most serious because they involve intentionally fraudulent conduct. This is where prison time becomes possible.
Can the SEC Pursue Criminal Charges?
No, the SEC does not have the legal authority to pursue criminal charges on its own. However, that does not mean that you cannot face criminal charges for your conduct. The SEC will just make a criminal referral to another agency – typically the U.S. Department of Justice (DOJ), though occasionally to the Federal Bureau of Investigation (FBI). The SEC’s investigation will then form the core of the evidence against you, and the SEC’s personnel will often continue to be involved in the process.
What Can Trigger an SEC Investigation?
SEC investigations can be triggered in numerous ways, such as:
- Investor complaints
- A whistleblower’s complaint
- Market surveillance
- Suspicious information in public disclosures
- Referrals from other federal law enforcement agencies, like the Internal Revenue Service (IRS)
- Media reports
Why Should I Consider Hiring The Criminal Defense Firm?
Several things set The Criminal Defense Firm apart from other SEC fraud defense firms in Santa Clara. Chief among them, though, is the fact that many of our defense attorneys only came to our firm after a long career within the SEC or the DOJ or FBI, investigating and prosecuting cases similar to your own. They know what current law enforcement agents are looking for, how they intend to find it, and how they will react to your response to the investigation.
Even better, The Criminal Defense Firm is known for its stance against employing junior associates and paralegals. Everyone in our firm is a senior-level lawyer with extensive experience in criminal law. That means all of the work performed on your case is done by someone with years of experience handling situations like the one you have been put in.
Why Don't You Call Yourselves the Best Defense Firm in Santa Clara?
That is something that we prefer to let our prior clients say in the testimonials that they leave about The Criminal Defense Firm.
The Criminal Defense Firm: Strong Representation in Santa Clara, California
The criminal securities fraud defense team at The Criminal Defense Firm has helped numerous suspects and defendants in Santa Clara protect themselves from an intrusive SEC investigation or beat back criminal charges that have been referred to other agencies in the federal government.
Contact them online or call their national law office at (866) 603-4540 for legal representation.