Circumstances That Lead To Securities Litigation
From a financial standpoint, securities fraud is a particularly devastating form of fraud. All types of fraud have the potential to be financially damaging of course, but the effects of securities fraud can be especially long lasting and considerable.
Securities fraud is also called stock fraud or investment fraud, but the basic premise is the same. This type of crime involves falsifying information in order to convince potential victims to purchase stocks or sell off stocks that they already own. In almost all cases, securities fraud results in the loss of stocks, and even the victim may be in violation of securities laws.
Forms of securities fraud
Some forms of securities fraud involve direct embezzlement by stockbrokers assigned to manage the investments. These types of crimes may also be committed via the manipulation of stocks, intentionally making erroneous statements on financial reports, and misleading auditors. Securities fraud can also take on the form of various illegal activities, such as insider trading and other activities performed on the trading floor.
The victims of securities fraud are generally inexperienced investors that are easily convinced to enter into shady investment “opportunities”. These people usually do not have the ability, knowledge, or experience to disregard risky investments. In most cases, these would be investors are also not in a financially favorable position to less their capital, which makes securities fraud even more devastating.
Securities fraud can occur almost anywhere in the world of course, but the United States is particularly fertile ground for such illegal activities, due to the much larger market and high number of willing investors. With the sizeable disposal income and savings of the middle class, they are particularly prone to falling for securities fraud, especially if they are relatively inexperienced and looking for an investment opportunity.
Financial toll of securities fraud
It has been estimated that the amount of money lost to securities fraud in the United States ranges from $10 to 40 billion every year. Of that amount, the Securities Investor Protection Corporation estimates that microcap stock fraud accounts for anywhere from $1 to 3 billion. Because of these high figures, securities fraud can have a potentially damaging effect on securities and commodities trading.
The number of class-action lawsuits involving securities fraud increased by as much as 43% in the period from 2006 to 2007. This high number can be traced to several factors, including the backdating and subprime incidents that took place in 2006 and 2007 respectively. Despite the number of securities fraud related lawsuits however, cases that were actually filed remained lower than the average throughout history.
Some analysts attribute the increase in securities fraud to the popularity of the Internet, which provides criminals with a seemingly endless supply of new victims. The market also went through a dramatic period of growth during the 1990s, which resulted in a significant increase in potential victims.
More recently, securities fraud has taken on a more subtle and insidious tone, with the introduction of more complex investment vehicles. Fraudsters are also turning to overseas investment markets in search of new victims.
If you have been the victim of securities fraud, you may be eligible to file a lawsuit against the individuals or company responsible. It is absolutely important to keep careful records of all your transactions and to seek the best legal representation you can afford. Securities litigation can be a costly and long drawn out process, so you will want to make sure that you are adequately protected. With the help of a law firm that has sufficient experience litigating cases of securities fraud, you will be in a much better position to get compensation for any losses that you may have incurred.