The concept of securities fraud is incredibly complex. It is regulated by a range of different stock exchanges and federal regulations, which adds to it being hard to understand. Securities regulations and laws are enforced by the SEC or the United States Securities and Exchange Commission. They are the ones that charge someone with securities fraud, regardless of which state the fraud was committed in.
Laws and Penalties
The SEC is guided in Ohio by ORC 1707 – Securities. This defines that securities fraud is where securities are purchased or sold in violation of the confidence or trust regarding information that is not available to the public. If, for instance, a person is induced to conduct a trade using false information, then securities fraud was committed by the one who provided the false information. But other actions can also be trialed as such. For instance, providing tips to the public over privileged securities information is also classed as securities fraud. Managers can also be charged with securities fraud for making false accounting entries that result into investors making trading decisions that cause them to lose money.
Securities fraud and insider trading are closely related, and both are made illegal under 15 USC 78j and 17 CFR 240 10b-5. The codes discuss using manipulative and deceptive devices when trading securities.
Penalties and sentencing guidelines for securities fraud in Ohio determine that the fraud is economic in nature. Hence, the basic prison term if convicted is up to six months. However, significant considerations will be made in relation to the amounts that were defrauded. For instance, if there were gains of over $550,000, then a recommended prison sentence is 51 months. If there was an organized scheme to defraud, prison sentence is recommended at 21 months.
In a crackdown on securities fraud, the SEC and courts have increased the severity of punishments. The average sentence if convicted in 2012 was 17.3 months. This is a marked increased compared to the five years prior, and it seems that this trend has continued since.
Securities Fraud Defenses
A securities fraud accusation is a serious one, and building an excellent defense is very important. Good lawyers who have experience in these types of cases are able to help, even if they find these cases complex and difficult. Securities fraud is a form of taking advantage of an investor, manipulating him or her into investing in or selling certain stocks by offering false information, and the SEC is now prioritizing securities fraud prosecution. This is because investors can lose faith in the securities market after they have been defrauded of large amounts of money.
Possible defenses include:
- Demonstrating that you were not aware of the fact that the information you provided to someone else to use as a basis for making a decision in a trade, was in fact false or erroneous. For instance, if someone had tipped you and you relayed that information to an investor, you could be charged with securities fraud even though you genuinely didn’t know that the information was not correct.
- Demonstrating that there is insufficient evidence, thereby casting reasonable doubt. The prosecution has the burden of proof to demonstrate that you acted illegally and they must present sufficient elements to actually prove this. If they are unable to do this, a conviction will be impossible.
Statute of Limitations
All non-capital cases have a statute of limitations in Ohio. This means that, after a certain time period has elapsed, people can no longer be charged with it. Securities Fraud, under the Securities Exchange Act is a federal crime. This means that the statute of limitations is six years. The clock starts ticking at the point that the false information were noticed.
The statute of limitations can be tolled and/or extended, however. It can be tolled if the defendant has been outside of the country and was therefore not able to be prosecuted. It can be extended if the other crimes were also committed as part of the securities fraud. Common examples include money laundering, embezzlement, and other forms of fraud.
Ohio Securities Fraud Cases
- SEC charges ohio-based investment adviser and president for fraudulently hiding account shortfall
- Three investment professionals arrested and charged in Manhattan federal court in connection with sophisticated scheme to defraud investors – one charged in Ohio
- Securities headlines: Ohio financial adviser faces criminal charges, Petters Ponzi scam investors still waiting for their money, and FINRA recommends disciplinary action against ex-Jefferies bond trader
- SEC charges bank, others in pay-to-play scheme over Ohio public pension funds
- Gates Mills businessman charged with concocting sophisticated stock swindle