If you discover that you are under investigation by the SEC, FBI, or other federal financial industry investigatory agency (FINRA, U.S. Commodity Futures Exchange Commission, etc.), you should know that the investigation was likely underway long before you became aware of it. This is one of the reasons it is critical that you secure the legal counsel of a Maryland federal securities fraud lawyer as quickly as possible.
Federal Securities Fraud Basics
Enron. WorldCom. Qwest. Arthur Andersen. Bernie Madoff. These names have become synonymous with securities fraud after acts of investment fraud and accounting fraud were unveiled. In fact, Bernie Madoff’s Ponzi scheme, which bilked investors out of $65 billion is said to be the largest private Ponzi scheme in U.S. history. Madoff pleaded guilty to 11 federal criminal counts, including securities fraud, mail fraud, wire fraud, and money laundering. He was sentenced to 150 years in prison and ordered by the court to pay $17 billion in restitution.
Of course, not every act of securities fraud is on the scale of the Madoff, Enron, or WorldCom scandals—but even smaller acts of fraud are punishable by prison, fines, and restitution under federal law and may warrant contact with a Maryland federal securities fraud lawyer.
While the Securities and Exchange Commission (SEC) is responsible for enforcing civil penalties against those accused of stock fraud, investment fraud, and various types of securities fraud, the United States Department of Justice (DOJ) is responsible for criminal enforcement of securities fraud. In many cases, criminal investigations start out as civil investigation with the SEC or another financial industry related agency. But once the SEC or other agency uncovers evidence of criminal wrongdoing, they may make a referral to the DOJ and then work together with them to assist in prosecuting the criminal case.
In Maryland, the U.S. Attorney’s Office and other federal prosecutors bring securities fraud cases in the United States District Court for the District of Maryland, with courts located in Baltimore and Greenbelt. It is in these courts that a Maryland federal securities fraud lawyer can prove truly valuable.
What is Securities Fraud?
Securities fraud is a broad term that encompasses any act of willful deception or misrepresentation related to the purchase and sale of stocks, commodities, and investments.
Securities fraud typically involves the intentional misrepresentation of facts involving corporate stock shares traded on public markets to investors in order to make a profit. Types of securities fraud include the following:
- Insider trading, or using confidential corporate information to manipulate the purchase or sale of stocks;
- Accounting fraud, or falsifying or destroying account records to misrepresent the activities of the business or the corporation’s overall health;
- Ponzi schemes or pyramid schemes, in which investors are deceived by an investment manager and paid returns from subsequent investors, with no real investment product or opportunity;
- Churning, or advising or encouraging investors to engage in excessive trading in order to generate more fees for the broker, without regard for the best interest of the investor;
- Backdating stock options; and
- Advance fee schemes, in which an investor is asked to pay taxes or fees in order to obtain information about a “once in a lifetime” investment opportunity.
Federal Securities Fraud Laws
There are a number of federal laws, rules, and acts of legislation pertaining to securities and the financial sector. A Maryland federal securities fraud lawyer will be able to explain them to you in greater detail, but this page will provide a general overview.
The primary act governing securities exchanges is the Securities Exchange Act of 1934, codified in 15 U.S.C. Section 78 et seq.
“Rule 10-b5,” encoded in 17 CFR 240.10b-5 is the primary statutory authority against using “manipulative and deceptive devices” in interstate commerce and national securities exchange.
Specifically, the United States Code prohibits and penalizes securities fraud under 18 U.S.C. 1348. Under this statute, securities fraud, or using deception or misrepresentation in connection with any security or commodity, is punishable by a maximum 25 years in prison in addition to fines, restitution, civil penalties, and asset forfeiture.
Because of the nature of securities fraud and all of its various forms, there are a number of ways the offense or offenses may be prosecuted under federal law, including but not limited to:
- Conspiracy
- False Statements
- Mail fraud
- Obstruction of Justice (and destruction of documents under the Sarbanes-Oxley Act of 2002)
- Perjury
- Whistleblower retaliation
- Wire fraud
Securities fraud and corporate fraud seemed to reach a heyday in the early 2000’s. In 2002, President George W. Bush created the Corporate Fraud Task Force to investigate and prosecute these acts of fraud. In its first five years, the task force garnered more than 1,200 corporate fraud convictions.
In 2009, President Barack Obama replaced the Corporate Fraud Task Force with an interagency Financial Fraud Enforcement Task Force under the oversight of the DOJ. This task force combines the efforts of more than 20 federal agencies to fuel its mission “to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, recover proceeds for victims and address financial discrimination in the lending and financial markets.”
Why Contact a Maryland Federal Securities Fraud Lawyer?
Obviously, the federal government believes securities fraud and other acts of financial fraud to be serious offenses, worthy of significant manpower and resources to investigate and prosecute these crimes. If you are caught in the crosshairs of a federal investigation, you need thorough, aggressive criminal defense representation as quickly as possible. Additionally, if you are facing a civil investigation only, it is important to retain the services of a white collar criminal defense attorney as early as possible, to protect your rights in case there is a referral to the DOJ. Call today to find a Maryland federal securities fraud lawyer equipped to handle your case.
