People who deal with securities and information about publicly traded companies have to be careful about what they say and do. It is possible for a person to face criminal charges if he or she makes false claims that others use to make decisions about investments.
One serious type of securities fraud is insider trading. This occurs when a person who has intimate knowledge of a company’s financial situation or circumstances that could affect the finances uses that information to buy or sell shares of the company.
The person who is accused of insider trading doesn’t have to be an employee of the company. In fact, Martha Stewart is one example of this. She was a friend of an executive at a company where she was a shareholder. Stewart sold her shares of the company, the executive sold his shares and his daughter’s shares and then an announcement was made that a drug the company submitted for Food and Drug Administration approval was denied approval.
Misreporting a company’s financial situation is another form of securities fraud if you are a representative of the company. The Enron case is an example of this type of criminal activity. Third-party misrepresentation, which occurs when someone misrepresents what is going on in an industry, sector or company in an effort to affect trading, is another form.
Securities-related charges are often very complex. The investigations into these activities could have been going on for a while — possibly before you even knew about them. The complexity of the case is one of the reasons why you need to start your defense planning as soon as you can.
Source: FindLaw, “Securities Fraud,” accessed Nov. 23, 2016