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Securities Fraud: What You Need to Know About Its Legal Definition
Definition & Meaning
Securities fraud, also known as stock fraud or investment fraud, refers to deceptive practices that mislead investors into making decisions about buying or selling securities based on false information. This type of fraud violates securities laws and can lead to significant financial losses for investors. Common forms of securities fraud include providing inaccurate information in a company's financial reports, insider trading, and front running, which is when a trader executes orders on a security for their own account while taking advantage of advance knowledge of pending orders from their clients.
Table of content
Legal Use & context
Securities fraud is primarily addressed in civil and criminal law contexts. Legal actions can be taken against individuals or entities that engage in fraudulent activities related to securities. Victims of securities fraud may seek compensation through lawsuits or regulatory complaints. Users can manage some aspects of these processes by utilizing legal templates available through US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company falsely reports its earnings to inflate its stock price. Investors, believing the company is performing well, buy shares and later suffer losses when the truth is revealed.
Example 2: An insider at a company trades stock based on confidential information about an upcoming merger, which is illegal and constitutes insider trading.
Relevant laws & statutes
The primary laws governing securities fraud include:
The Securities Act of 1933
The Securities Exchange Act of 1934
The Sarbanes-Oxley Act of 2002
State-by-state differences
Examples of state differences (not exhaustive):
State
Key Differences
California
Has specific laws addressing securities fraud in addition to federal laws.
New York
Enforces strict penalties for insider trading and securities fraud.
Texas
Includes provisions for whistleblower protections in securities fraud cases.
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Securities Fraud
Deceptive practices related to securities transactions.
Focuses on misleading investors.
Insider Trading
Trading based on non-public, material information.
A specific type of securities fraud.
Investment Fraud
Broad term for fraud in investment activities.
Includes various schemes beyond securities.
Common misunderstandings
What to do if this term applies to you
If you believe you have been a victim of securities fraud, consider taking the following steps:
Document all relevant information and communications.
Contact a legal professional who specializes in securities law.
Explore US Legal Forms for templates that can assist you in filing complaints or lawsuits.
Report the fraud to regulatory authorities, such as the Securities and Exchange Commission (SEC).
Find the legal form that fits your case
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