Securities fraud is a very serious form of white-collar crime, in which companies or people such as stockbrokers, corporations, investment bankers, or brokerage firms misrepresent the information that they give investors when it comes to making crucial decisions about investments. In some cases, securities fraud may even be committed by individuals in an independent format, such as those who engage in insider trading. The types of misrepresentation that might be used in California securities fraud may include offering false information, withholding crucial information, offering inside information, or providing bad advice.
Allegations of securities fraud in California and across the United States are investigated by the Securities and Exchange Commission, otherwise known as the SEC, as well as the National Association of Securities Dealers, or NASD. The crime can carry both civil and criminal penalties that lead to fines and imprisonment for the people involved. Common examples of securities fraud may include lying on SEC filings, manipulating stock prices, and committing accounting fraud.
Laws and Penalties
The sentencing guidelines that are used in securities fraud are complicated. Although each count of securities fraud that is committed may eventually result in a prison sentence, it isn’t always straightforward to develop a restitution amount or fine that reflects the damage done on a social level. Federal authorities sometimes have access to sophisticated formulae for sentencing that they might use to determine the value of certain penalties based on the fraud in question.
In California law, securities fraud is considered a “wobbler”, which means that it can either be prosecuted as a felony or a misdemeanor. If you violate the securities fraud laws in California, you can face a prison sentence, alongside with some huge fines.
If you willfully sell securities in California without complying with the qualification requirements, or sell securities in a way that violates the terms of your qualification, you can face a fine of up to $1,000,000, and/or sixteenth months, to three years in county jail. Alternatively, individuals who willfully engage in the manipulation of the market, make misleading statements in transactions of securities, or engage in insider trading can face a fine of up to ten million dollars, and up to five years in county jail.
Importantly, securities fraud is also a federal crime, so if you are charged with securities fraud in California then you might also face federal charges. Often, most federal securities cases are investigated by the SEC before they are given to the federal Department of Justice. Federal penalties for securities fraud are harsher than those under California law, and you could end up in prison for twenty years if you are charged with securities fraud on a federal level.
Securities Fraud Defenses
If you find yourself in a position wherein you are accused of California securities fraud, it’s worth noting that there are legal defenses available that might help you to beat the charges. The most useful defense is simply a lack of criminal intent. In other words, if your lawyer can prove that you did not act willfully in committing securities fraud, then you cannot be convicted of the charge.
The no-knowledge provision in California law allows for someone to be considered not guilty of fraud when the fraud that was carried out was not done with knowledge or intention. In other words, if you can find a way to prove that you had no idea that what you were doing is fraud, or that you did not know that you were committing fraud in the first place, then you cannot be convicted of fraud.
What’s more, if you can prove that someone else committed the fraud that you have been charged with, you can also avoid being sentenced under the securities fraud penalties of California. Obviously, this can be quite difficult, which is why it’s so important to have a good lawyer present.
Statute of Limitations
In California, the statute of limitations regarding securities fraud is very clear. The federal rules of criminal procedure that are otherwise known as 18 USC 3282, demand that any trial, punishment, or prosecution that are given in response to a non-capital federal offense such as securities fraud must be instituted by an indictment of the provision of information for the case within five years of that offense taking place. However, in some cases, securities fraud situations can have repercussions that are particularly far-reaching, which can mean that defendants may end up being prosecuted for a subset of crimes that occurred as a result of the original violation, even though the initial statute of limitations for securities fraud has already expired.
California Securities Fraud Cases
- SEC agrees to settle fraud charges with California municipal advisory firms
- Municipal advisory firm charged with fraud in its bidding process for hiring finance professionals
- 22 people charged with Social Security fraud
- California federal court dismisses all claims with prejudice in case of Toshiba regarding sales of American Depositary Shares
- First Mortgage Corp. executives settle charges of defrauding investors