How Does Securities Fraud Impact Your Investments?

Securities fraud is a financial crime committed by an individual or organization. Victims of securities fraud can lose large amounts of money. Some of the more common examples of securities fraud include:

Insider trading. Arguably, one of the more well-known forms of securities fraud, insider trading involves someone with confidential information about the workings of an organization that may impact the price of the organization’s stock using this information to help guide choices to buy or sell stock before the information is disclosed to the public.

Pump-and-dump. This type of scheme involves spreading false or fraudulent information about stocks with the intent of increasing the price and then selling off the perpetrator’s shares at a profit. Examples of this type of misconduct has been associated with meme stocks, and most frequently, with Ryan Cohen's scheme involving Bed Bath & Beyond Corporation.

Fraudulent misstatement or concealment. This final example involves a representative of the company providing false or fraudulent information about the company’s workings in an effort to artificially impact the worth of the company’s stock. These misstatements can be concerning a new drug coming to market, the financial health of the organization, or key contracts earned by the company, among others.

This list is by no means exhaustive of all the ways in which securities fraud can reveal itself and impact investments, but a starting point of what to watch out for.

Company board members or executives – the usual culprits of securities fraud – have a fiduciary duty to company shareholders. When company fiduciaries violate their duty in pursuit of self-interests, there are repercussions. Shareholders who have had their rights violated can take action to correct the wrongdoing.

What if I am the victim of securities fraud?

Those who believe they are the victim of securities fraud have options. Legal tools are available to hold the perpetrator accountable for their wrongdoing. The process generally begins when a stockholder files a class action complaint on behalf of all similarly harmed shareholders. The complaint will identify the class – the group of people on whose behalf the complaint was filed. The class period covers the time when the wrongdoing began through the time in which the investing public learned the truth about the wrongdoing. Though one shareholder will file the complaint on behalf of the class, the court will identify the individual or group of individuals who incurred the greatest loss due to the misconduct and name that person or group the representative plaintiff to lead the litigation. Robbins LLP has experience representing shareholders in securities fraud class actions. If you believe you are the victim of securities fraud, contact us today to speak with one of our attorneys.

Additionally, you can report the conduct to the Securities & Exchange Commission. When you do, you may be eligible to earn a whistleblower award. Robbins LLP has significant experience assisting whistleblowers submit Tips to the SEC. Contact us today if you would like assistance submitting your Tip complaint to the SEC.