Securities investing and trading is carefully regulated by rules and laws for the protection of public investors. The violation of these rules, particularly through various deceptive actions and schemes to cheat or take advantage of investors, is commonly known as securities fraud. Securities fraud may be committed by:
- Brokers-dealers (misleading clients or advising based on inside information)
- Financial advisors or analysts (purposefully offering poor advice or inside information)
- Corporations (hiding or distorting information)
- Private investors (acting on inside information) Most investment losses are the result of market forces, trends and factors which have nothing to do with securities fraud
The majority of investment advisors and stockbrokers are honest, decent individuals who follow the rules of the securities industry and provide a valuable service to the public. Unfortunately there are some unethical and dishonest investment advisors and there are some brokerage firms that do not supervise their brokers and accounts as carefully as they are required. If you invest in securities (stocks, bonds, options, limited partnerships, mutual funds, certain commodities, etc.) and you have experienced problems with your investments, your stockbroker or investment advisor, you may be a victim of securities fraud. Most investors who have been defrauded do not know what happened to their investments until it is too late. But even after the losses have occurred, you have certain rights of recourse which you should be aware of which may provide you an opportunity to recover your losses from a stockbroker or brokerage firm. You may also be entitled to compensation for the loss of income that their investments should have been generating, interest on the losses and legal fees.If you can answer yes to any of the following questions, you may have been a victim of securities fraud:
- Have you been the victim of bad investment advice?
- Did your stockbroker recommend risky investments without explaining the risks?
- Did your stockbroker make trades without your understanding or authorization?
- Did your stockbroker excessively trade your account?
Landmark Enforcement Action Paves the Way for Sweeping Investment Reform
In April 2002, a joint investigation was coordinated by three major investment firms for fraud. Those firms were Citigroup’s Salomon Smith Barney, Merrill Lynch, and Credit Suisse First Boston. When the joint investigation had been completed, it was found that for the approximate period of mid-1999 through mid-2001 or later, a total of ten investment firms and two well-known stock analysts had engaged in acts and practices that created or maintained inappropriate influence by investment banking over research analysts, thereby imposing conflicts of interest on research analysts that the firms failed to manage in an adequate or appropriate manner. In addition, the regulators found supervisory deficiencies at every firm. An landmark global settlement of $1.4 billion was made in December 2002 but was not finalized until April 28, 2003. Following the standard practice in resolving such disputes with the commission, the firms and the research analysts neither admitted nor denied the allegations.