Securities fraud is a common type of white-collar crime that occurs in New York and elsewhere. Understanding what constitutes securities fraud can be difficult for people without knowing the securities regulations. There are a few common types of securities fraud that can lead to criminal charges.
The crime of securities fraud occurs when a party makes false statements about a company’s finances or profits, leading others to make decisions based on those statements. It also occurs when people act on inside information that is not available to the public. There are three primary ways that securities fraud is committed, including actions by the company, insider trading and misrepresentations by third parties.
Companies might commit securities fraud when they publish inaccurate information about their profits and the health of their businesses. This can cause the value of the company’s stock to be artificially increased, leading investors to buy shares based on false information. Insider trading occurs when people within a company act on information that the general public doesn’t have. For example, an individual might sell off shares to avoid losses when he or she learns of negative events before the public learns about them. Misrepresentations by third parties happen when people outside of a company give false information about the value of its stock. A common type of third-party misrepresentation is a pump-and-dump scheme in which an individual buys up a large number of shares of a company to drive up its value and then quickly sells the shares when the price increases.
White-collar crimes can result in severe penalties. Individuals and companies that are facing white-collar criminal charges may want to retain experienced defense lawyers as soon as possible. People who learn that they are being investigated for securities fraud may want to consult lawyers before they are charged or indicted.