Beware the Hidden Trap of Security Fraud


Litigation attorneys

It’s the thought of many Americans: Take a percentage of income and invest it. While these investments can take many forms, a popular route is to enlist the services of a financial advisor who can invest your money with the expertise of growing your income often through stocks, bonds, or mutual funds.

Choosing the right financial advisor entails trust: This is your money. And some financial advisors are less scrupulous than you might think.

Consider the following statistics.

  • In 2014, there were over 1,600 securities and commodities fraud cases pending.
  • In 2014, there were over 600 corporate fraud cases pending.

Securities fraud is commonly referred to as stock fraud or investment fraud. It is a deceptive practice that persuades investors to put their money in stocks or commodities based on false information. This frequently results in financial losses and is considered in violation of security laws.

Banks have also been penalized:

  • In 2014, the Security and Exchange Commission (SEC) filed a lawsuit against Bank of America alleging they did not inform investors about uncertainties in future income when tied to mortgage loans. Bank of America agreed to pay $20 million.
  • In 2015, the SEC charged Deutsche Bank AG with filing misstated financial reports. Deutsche Bank AG agreed to pay a fine of $55 million.

Some tips to spot securities fraud before entering into the agreement include an advisor telling you that the investment is “low risk, no risk, or a guarantee.” Another is if an advisor tells you they have “inside or special connections” to individuals that gives them extra information, thereby guaranteeing you your return.

If you believe you have been a victim of securities fraud, seek out a securities fraud attorney. Other titles include a stockbroker fraud lawyer or a financial advisor attorney.

An attorney can consult with you about the proper action to take in your case. Options include litigation, which is the process involved with reaching an agreement between you and the financial advisor who has committed securities fraud. Litigation ends in a settlement, which usually is monetary.

Litigation attorneys are present to represent you during the legal process and should be familiar with the laws surrounding your state to handle your case appropriately. While it’s important to familiarize yourself with impending signs of securities fraud before making an investment, it’s possible to recover from fraud if the correct action is taken.

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