Stock and Securities Fraud Lawsuits

Our attorneys represent investors who have lost money due to fraudulent investment advisers and their firms. To find out if you have a claim, contact us today. We're experts at securities fraud litigation.

Fraudulent Investment Practices

Assuming that he has enough money to invest today, the common man faces a dilemma. He wants to find a secure place to put his money, not risk so much that he loses more than he can afford. He will need to find a trusted advisor or stock broker to help him with investing.

Someone new to investing through a stock broker or financial advisor needs to be aware of the possibility of being defrauded by an investment counselor. Some important advice for avoiding securities fraud includes:

  • Check the credentials of the person you are entrusting your money to. Investigate the credentials of the firm he or she works for.
  • Ensure your broker or advisor is able to explain an investment so you are satisfied you understand him or her.
  • Be sure your advisor is giving you accurate information.
  • Beware of promises of high returns with little investment and no or low risk
  • Stay away from high pressure sales tactics
  • Understand what a Ponzi scheme or Pyramid scheme is. Be sure to stay away from them.
  • Watch out for "advance fee schemes" in which you are asked to pay a small amount of money upfront and are told you will realize unrealistically high gains.
  • Recognize that if you feel you have been cheated, you can seek the advice of a stock fraud lawyer and pursue a stock fraud lawsuit.

Securities Laws and Regulations

Laws overseeing consumer protection began decades ago. The Securities and Exchange Commission describes the major acts as follows:

  • Securities Act of 1933: This often is called the "truth in securities law." Its two primary aims are (a) to require that investors have information, both financial and otherwise, about securities being offered for sale to the public; and (b) forbid deceit and misrepresentation in the sale of securities.
  • Securities Exchange Act of 1934: This act was passed by Congress to establish the Securities and Exchange Commission (SEC), which was empowered to oversee brokerage firms and the country's securities self-regulatory organizations such as the New York Stock Exchange, the American Stock Exchange, and the National Association of Securities Dealers which runs NASDAQ. The act has regulatory authority and disciplinary authority over persons and companies in the market. The SEC also has disciplinary authority regarding corporate reporting, proxy solicitations, tender offers, insider trading and the registration of market participants.
  • Trust Indenture Act of 193: This applies to debt securities including bonds, debentures, and notes offered for sale to the public.
  • Investment Advisers Act of 1940: Regulates investment advisors, requiring advisers who manage at least $100 million to register with the SEC.
  • Sarbanes-Oxley Act of 2002: Advanced corporate responsibility and financial disclosure and fought corporate and accounting fraud.
  • Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Was meant to reshape the U.S. regulatory system in areas including consumer protection, trading restrictions, credit ratings, regulation of financial products, and corporate governance, disclosure and transparency.

A Recent Example of Stock Fraud Lawsuit

A couple of years ago the SEC sued Goldman, Sachs & Co. and one of the company's employees,

"for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation (CDO) that Goldman Sachs structured and marketed to investors. This synthetic CDO was tied to the performance of subprime residential mortgage-backed securities and was structured and marketed by Goldman, Sachs in early 2007 when the United States housing market and related securities were beginning to show signs of distress. Synthetic CDOs [like ABACUS 2007-AC1] contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market."

The government commission accused Goldman, Sachs of misleading investors and collaborating with a third party, a large hedge fund, whose financial interests were directly opposed to those of the Goldman Sachs investors. This third party was responsible for setting up the portfolio. The hedge fund operators manipulated the market and engaged in insider trading. As a result, the investors lost $1 billion and the hedge fund made $1 billion.

Because of the SEC lawsuit, Goldman, Sachs paid $550 million to settle civil charges that it misled its clients by selling mortgage securities that were secretly designed by a hedge-fund firm to cash in on the housing market's collapse.

Contact a Stock & Securities Fraud Lawyer

If you feel that you've been defrauded by an investment counselor, you can seek legal counsel from our attorneys . We represent individuals in securities fraud lawsuits and help them recover their losses. To learn more, schedule a consultation today.