A Quick And Easy Intro To Securities Fraud

by Scott L. Silver

Last Updated June 3, 2025 In Securities Fraud

We know that securities fraud might seem like a big topic that can be difficult to navigate. However, that should not prevent you from taking the next step and getting legal help when you believe you were a victim of this pervasive form of fraud. We will try to provide a brief explanation of the securities industry and what fraud actually means.

Silver Law Group represents people in securities and investment fraud cases who have invested their money through a financial advisor who placed them in unsuitable investments, failed to disclose material risks, had a conflict of interest, and, in many cases, invested in Ponzi schemes. In any of these situations, our securities fraud lawyers could help you recover your investments through class actions or securities arbitration claims.

How Does A Company Get Their Stock On The Stock Market?

Primarily, companies can either raise money through an Initial Public Offering (IPO) that allows them to be listed on a public exchange like the New York Stock Exchange or the NASDAQ; or alternatively, they continue to raise money through private offerings, frequently through an SEC rule known as Regulation D. Investors can put their money into hedge funds, alternative investments, illiquid REITs, or a host of other investment products.

Going public allows the company to raise a substantial amount of capital from many investors, and it gives liquidity to their shareholders, meaning they could buy and sell the stock at any given time. To be publicly traded, the company must comply with the SEC rules and regulations that require a great deal of financial and other information to be made publicly available, including any potential risks. In essence, they must offer full transparency to their potential investors.

Adhering to SEC disclosure rules can be quite expensive and time-consuming, but they absolutely must be accurate to avoid potential lawsuits.

What Do Investors Typically Look For When Deciding To Buy Or Sell Stock?

Ultimately, people are looking for an investment that will make them money, which means identifying a company they think will be profitable in the future, thus allowing them to sell their stock later at a higher price than when they bought it. Investors typically participate in the buying and selling of stocks through the advice and recommendations of financial advisors. They can buy stock on public exchanges or through other alternatives, including private offerings.

Securities Fraud In The United States

There are federal securities laws which are passed by Congress and overseen by the Securities and Exchange Commission (SEC), frequently captured under Rule 10b-5 which is the catch-all securities fraud statute preventing fraud, misrepresentation, or other misconduct. There are also criminal statutes that can bring charges for stealing or embezzling other people’s money, such as what might happen in a Ponzi scheme.

Securities fraud in the United States is massive. People cheating others out of their money is as old as time itself and it happens practically every day. It could be as egregious as somebody stealing money through a Ponzi scheme, claiming they are using it for one purpose, when they are instead using it for another. There are also common law claims, where a company might fail to disclose certain material risks that they had a duty to disclose.

How Does The SEC Fight Against And Investigate Cases Of Securities Fraud?

The SEC is responsible for overseeing our financial markets, a very broad sector of the economy which includes publicly traded companies, the stock exchanges, and investment banks. They have a large staff and budget, with hundreds of lawyers, accountants, and forensic analysis, to ensure the financial services industry acts appropriately, and companies that have raised money for investors are meeting their disclosure obligations. They can also take action when fraud occurs, and may even recover some of the lost investments.

When your investments were lost due to fraudulent practices, you have the right to seek compensation from the fraudsters or other entities who aided and abetted their scheme. Silver Law Group routinely represents investors in securities class actions, derivative claims, and securities arbitration depending on the facts and potential responsible parties. Silver Law Group also works with bankruptcy trustees and SEC receivers to help you get what you are owed. Please call us now and learn how we can help you.