As we leave 2025 behind and enter 2026, we want shareholders to be vigilant. As evidenced by our $100 million settlement on behalf of Wells Fargo & Co., bad actors can harm even the most profitable companies, injuring the company and its shareholders. 

This year, we have seen an increase in fraudulent behavior by "investment groups" promoting stocks through social media channels. These promoters engage in a pump and dump scheme, luring unsuspecting investors to help raise the price of a stocks for the benefit of the promoters. The stock inevitably crashes and the unsuspecting investors are left with nothing. Some indicators to be aware of include:  

• Promotion of companies incorporated outside of the U.S. and headquartered in a foreign jurisdiction.
• Tips coming unsolicited from alleged investment brokers and advisors.
• Pressure to act quickly.
• Urgent pitches to invest in new companies at low prices with a promise of dramatic price increases or guarantees to cover investment losses.

Whether avoiding a fraudulent scam or negligent mismanagement, stockholders must stay alert and know their rights.

Shareholders should know they are not at fault.

Shareholders invest in companies for a variety of reasons. While the primary reason for investing is to earn money – either through an increase in stock price or dividend payouts – some shareholders have secondary motives in choosing their investments. A shareholder might use a product they love and want to invest in the company that makes it. A shareholder might support the goodwill and culture of a company and want to own a part of it. Sometimes shareholders are swayed by endorsements by their favorite actors.

Take the case of the beloved Walt Disney Company (NYSE: DIS), where individual or retail investors own 30% to 40% of the company's stock compared to other large corporations, which is typically closer to 12% to 15%. Disney fans feel a strong – often personal – connection to the company, which garners high levels of brand loyalty. Disney fans see stock ownership as a way to connect with the brand beyond just being a customer. Another company that espouses brand loyalty is Tesla (NASDAQ: TSLA), with many of its car owners also owning company stock. Like Disney, retail investors own approximately 35% of the company, motivated by loyalty to its brand and CEO.

Whatever the motivation, shareholders base their investment decisions on publicly available information. Though required by federal securities laws to provide honest and truthful representations in the sales of securities, not all companies are transparent. Corporate board members, officers, or other executives are oftentimes privy to material information that they choose to withhold from the investing public.

They may withhold this information out of fear of how the knowledge may impact the company's stock price or reputation, or what it might do to their own position within the company. When the truth is finally revealed – either through disclosures by the corporate fiduciaries, whistleblowers, or other investigations – the company's stock price usually declines, harming investors. Shareholders who purchased their stock believing they were making a sound investment often incur significant losses after the truth disclosures.

Though they bear the unfortunate financial impact, shareholders are not at fault for the stock's decline. They likely did all the right things in evaluating their investment choice. Because the information was hidden from the investing public, there was no way for investors to know of the stock's forthcoming demise.

Shareholders should know they are not alone.

The actions of the corporate board members, officers, or other executives that negatively impact the value of a company's stock, harms large swaths of people. After incurring damage, these stockholders have the ability to sue the company for securities law violations by filing a securities fraud class action. Suing as a group allows stockholders whose losses might not warrant bringing a separate action to work collectively to recover from the wrongdoers. In this way, one lawyer can represent the whole group or class to curb expenses and increase efficiency. In fact, most law firms that litigate securities fraud class actions work on a contingency fee basis, charging their clients nothing, and instead seeking fees from the company and its corporate fiduciaries so that investors are not further harmed by their wrongdoing.

Securities laws require that the shareholder who proves to the court that they incurred the largest loss due to the wrongdoing gets to lead the class action. This individual or group of individuals are then responsible for ensuring that all the other shareholders' interests are represented. If the case results in a settlement, all class members are notified and provided the opportunity to share in the settlement proceeds.

Shareholders should know how to spot wrongdoing.

While corporate fiduciaries often take great pains to cover their wrongdoing, certain suspicious conduct can serve as red flags for behavior that may pose a serious risk to investors. Activities shareholders should consider:

• Are there any signs of insider trading or executive departures? When insiders such as Chief Financial Officers or board members sell substantial amounts of stock or abruptly resign, it could indicate concern over undisclosed risks.
• Is there inconsistent financial reporting? A sudden revenue spike without matching cash flow, rising receivables, or changing accounting policies may indicate manipulation.
• Are there unusual or unexplained transactions on the financial reports? Large payments to unknown vendors, inflated expenses, or irregular accounting entries can signal asset misappropriation or internal fraud.
• Does the company guarantee "too good to be true" returns? Promises of guaranteed high returns, especially with urgency or vague details, often signal fraud or misleading sales tactics.

Shareholders should know there are various avenues of recourse against corporate wrongdoers.

Securities fraud class actions are brought by shareholders who purchased a company’s stock during the class period, which is defined as the time during which the company violated securities laws, beginning with the first false statement to the time when the company revealed the truth.

Shareholders who purchased the company's stock prior to the class period will not be able to participate in the class action, but they can bring a shareholder derivative action to help the company recover for the harm caused by the officers and directors. This type of lawsuit holds the officers and directors personally accountable for their damaging behavior, improves the company's governance practices, and prevents similar repeat offenses.

The ideal candidates for bringing a shareholder derivative action are long-term shareholders who purchased the stock based on a secondary motive mentioned above and who intend to retain shares of the company throughout the litigation process. The shareholder's interest in the future viability of the company makes them a strong candidate to shepherd this case to resolution.

Shareholders should know who to reach out to for help.

If you suspect a company you invest in is being harmed by the fiduciaries entrusted to the run the corporation, you should contact a shareholder rights attorney. Robbins LLP is a nationally recognized shareholder rights litigation law firm. Our partners hail from top-tier law schools, and include former federal prosecutors, career plaintiffs' lawyers, and defense firm litigators. Our attorneys are supported by a team of professional staff who share the firm's core values of excellence, integrity, and unity, and who are committed to making the firm's vision a reality. We are not intimated by moneyed interests or discouraged by uphill battles but thrive in the face of these challenges knowing that at the end of the day we have done right by our clients. Robbins LLP takes a client first approach thoroughly evaluating each claim to ensure we take only cases that have a chance of obtaining a recovery. Our legal services are offered on a contingency basis, meaning we are not paid unless we win – and we work hard to win. Whatever the outcome, Robbins LLP clients are not responsible for paying fees or costs.

Contact us today if you think you have been harmed by securities fraud.