Securities Fraud Laws in California

Securities Fraud Laws in California

Although some feel that securities fraud is not as big of a deal as other criminal offenses are simply because they do not see it physically harming someone else, this crime can be quite injurious to many people and can result in serious criminal penalties. These white-collar crimes are perpetrated both by hardened criminals as well as by financial officers, business people and many others who have an in-depth knowledge of the financial markets. While bail bonds can help to get individuals facing criminal penalties for securities fraud out of jail until their court dates, they cannot wipe away the long-term repercussions that will come from the criminal and civil suits for securities fraud.

What Is Securities Fraud?

Securities fraud may sometimes be called stock fraud or investment fraud. It refers to giving misleading or false information about finances or investments in order to get another person to sell or buy investments for one’s own personal gain. In many cases, the results of this fraud is that the deceiver will make huge financial gains while the person who was unknowingly fed misleading or false information sees huge losses.

Today, there are numerous California and federal securities fraud laws that protect against these practices. Despite this, much fraud still occurs away from the watchful eye of the law. In many cases, individuals, such as bankers or stockbrokers, perpetrate this crime. In other instances, entire companies undergo prosecutions for securities fraud.

California Securities Laws

There are several specific fraud crimes that can lead to criminal or civil penalties. These include the following:

  • Selling unqualified securities
  • Selling securities with noncompliant terms
  • Engaging in misleading behavior when buying or selling securities
  • Making misleading statements when buying or selling securities
  • Insider trading

Unqualified securities are those that are not disclosed appropriately with the California Department of Corporations or that do not comply with the qualification paperwork. Sometimes, these types of fraud crimes occur unintentionally and do not result in criminal penalties when securities were sold or purchased in good faith. However, in the case of misleading or false information as well as insider trading, there is basically no good faith clause because the intent of the deceitful information was to manipulate the market and come out with a personal profit.

In California, prosecutions for securities fraud falls into the territory of wobblers, which refers to crimes that can be prosecuted either as misdemeanors or as felonies. Punishments for individuals or companies perpetrating these crimes could include major financial fines as well as jail time. Those who knowingly go against the terms of qualification in California could be fined up to $1 million and face up to three years in county jail. Those who give out misleading information or who purposefully manipulate the market could be fined up to $10 million and face up to five years in a county jail.

Federal Securities Fraud Laws

Of course, individuals will have to worry not only about criminal and civil suits for securities fraud in California but also about federal charges, which could add to their overall penalties. Although these types of fraud may be called wobblers in California, they typically face criminal felony charges in federal courts and are punished with similar fines and often with time in a federal prison. In addition, restitution is usually required to repay those who have been defrauded. While probation may be a possibility, it is usually not considered for crimes that resulted in financial losses to another individual or company.

California securities laws are purposefully strict and come with huge criminal penalties for securities fraud to protect individuals and businesses from those who would purposefully manipulate the truth to make a profit. However, some people are occasionally falsely accused of this crime and find that they must protect themselves from the harsh consequences of a criminal conviction. Today, there is a statute of limitations in place to protect individuals from being accused of crimes from decades ago. For this reason, all prosecutions and trials must occur within fewer than five years from the time of the crime. Individuals accused of this crime must build up solid defenses to protect themselves from life-altering fines and jail times.

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