Securities fraud, also known as investor or stock fraud, covers a range of activities that violate federal and state laws pertaining to buying, selling and trading securities. The most common forms of securities fraud include:
• Misrepresentation (presenting misleading or false information to investors about a company, or its securities)
• Accounting fraud (manipulating or falsifying books or records to misrepresent a public company’s assets and liabilities)
• Insider trading (buying, selling or trading securities based on information that is not readily available to the general public)
Securities fraud is governed by both federal and state laws, and legal actions can be brought about by private investors or by a government agency, such as the U.S. Securities and Exchange Commission. Violations of federal securities laws are treated as serious offenses that can carry both civil and criminal penalties. Criminal investigations can lead to felony convictions that carry penalties of up to 20 years’ imprisonment. In addition, the Securities and Exchange Commission (SEC) and National Association of Securities Dealers (NASD) may impose civil fines against corporations or individuals convicted of securities fraud.