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What is securities fraud?

People often invest in securities in New York with the naive expectation of generating significant returns on their investments in a short amount of time. In reality, short-term financial gains made from securities are much more modest, with some people even losing money on such investments. When the latter occurs (and you happen the be the one who brokered said deals), accusations of fraud are often quick to accompany such losses. How, then, are you to show that work was legitimate, and that a client is simply trying to punish you for his or her unrealistic expectations? 

Securities fraud falls under the larger category of financial fraud in general. Proving fraud requires establishing that you had malicious intent when arranging a financial transaction (in this case, the purchase of a security). Intent can be a subjective matter, which can be both good and bad depending on the interpretations of whomever is hearing the case against you. 

However, each type of fraud has its own unique elements that must be proven in order for you to be convicted. According to the federal pattern jury instructions related to securities fraud (as shared the website FederalEvidence.com, those prosecuting your case must prove one the following: 

  • That you directly or indirectly employed a device, scheme or artifice to defraud in relation to the sale or purchase of a security 
  • That you made a false statement of material fact (or omitted making a statement of facts required for a statement to be true under the circumstances in which said statement was made)
  • That you engaged in an act or practice that would normally be viewed as fraud or deceit on purchasers or offerees

These elements must be proven beyond a reasonable doubt, meaning that there is no question as to the intent of your actions. 

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