Because of the complexity of the stock market, many every-day consumers hire investment professionals to manage their portfolios. We expect these investment professionals to manage our portfolios in an ethical, responsible, and profitable manner. After all, that is why we hire them.
Despite these expectations, however, allegations of securities fraud are all too common. The Law Offices of Robert Wayne Pearce P.A., has experienced securities fraud lawyers prepared to help you recover any investment losses resulting from fraud.
What Is Securities Fraud?
Securities fraud can occur in a variety of ways. Securities fraud involves the deception of investors or the manipulation of financial markets. Below are some of the most common forms of securities fraud.
Misrepresentation or Omission of Material Facts
Misrepresentation is an underlying issue with almost every fraud claim. With respect to a securities fraud claim, misrepresentation means that your financial advisor purposely presented you with information about an investment product that was misleading or untruthful.
Omission, on the other hand, refers to situations where financial advisors leave out specific information. This information must be relevant to your decision of whether to invest in a product.
Both practices are strictly prohibited. Nevertheless, they remain the most common forms of securities fraud.
Conversion of Funds
The simplest form of securities fraud occurs when a financial advisor steals an investor’s money. Financial advisors gain access to their clients’ private information and accounts to perform their duties. Most financial advisors are trustworthy and will use this information only to your benefit. However, some unscrupulous advisors use this information to their advantage instead.
A common example of conversion of funds is when a broker makes an investment recommendation to a client that requires issuing a check to the broker. But the broker does not use the check to fund the purported investment. Rather, the broker deposits the check into his or her own personal account.
Do you suspect that your financial advisor has been stealing your funds? If so, contact an experienced securities fraud lawyer today to discuss your options.
Insider trading involves the buying or selling of a stock by someone who has material information about the stock that is not yet available to the public. Material information means any information that may substantially impact an investor’s decision of whether to buy or sell the stock.
Insider trading also includes divulging material nonpublic information to someone else.
Notably, the SEC charged Martha Stewart with insider trading in 2003. The SEC accused Stewart of selling approximately 4,000 shares of ImClone Systems after receiving a tip from her Merrill Lynch broker that the CEO of the company sold all his shares. The information about the CEO was material, nonpublic information and implicated both Stewart and her broker in insider trading charges.
Sometimes fraudsters use the lure of inside information to induce investors to make an investment in a company that ultimately fails. That investor who acts upon the inside information may have problems not only with the SEC but recovering their investment losses.
Accounting fraud occurs when financial statements are intentionally manipulated to create a false appearance of financial well-being.
This occurs when a company or its employees deceive investors by providing them with misleading information about the company itself. Common examples of accounting fraud by companies include:
- Overstating revenue,
- Failing to record expenses, and
- Falsifying assets and liabilities.
Bur remember—the manipulation must be intentional. Accidents or mistakes will not necessarily constitute accounting fraud.
High-Yield Investment Programs
High-yield investment programs (HYIPs) are fraudulent investment schemes that promise investors extraordinarily high returns over short periods of time. The reason these types of fraudulent schemes are so successful is they intrigue investors.
HYIPs, often advertised online, typically guarantee investors over 100% returns in a one-year period. Despite these promises, the investor funds will often be used to pay earlier investors, with a cut going to the creators of the scheme.
Fraudsters advertise these investments as low-risk and high reward. However, there is little to no information about how the investment program is managed or where it is located.
If an investment sounds too good to be true, it probably is. If you lose money investing in an HYIP, contact an experienced securities fraud lawyer today.
Ponzi schemes are fraudulent investment operations that, instead of using funds from revenue, use funds from earlier investors to pay individuals who invest later. As you can see, the scheme can only continue as long as new investors keep putting in money. When new investors are no longer available, the scheme falls apart.
Advance Fee Schemes
In an advance fee scheme, investors must pay an upfront fee to finalize a deal prior to receiving any proceeds, money, stocks, or warrants. Fraudsters may refer to this fee as a tax, commission, deposit, or incidental expense that will be returned to the investor. Don’t be fooled by this mischaracterization.
Advance fee schemes often require clients to sign a contract and pay the advance fee to be introduced to a financing source. After transfer of the fee, however, the clients are informed that they are not eligible for financing. Thus, they cannot recover the fee that was paid.
If you are asked to provide funds to initiate a financial relationship, make sure you fully understand the agreement. When in doubt, contact a securities fraud lawyer today for assistance.
Pump-and-dump is an illegal scheme that uses false, misleading, or exaggerated claims to attempt to boost the price of a stock.
Typically, originators of the scheme have already purchased the stock targeted in the scheme. The con artists will post hundreds of misleading statements throughout the internet about the targeted stock, claiming that the company is planning to release a development that will cause the stock price to increase in an attempt to entice new investors.
After the new investors have bought into the company and caused the stock price to rise, the originators of the pump-and-dump scheme will sell all their shares. This causes the stock price to drop dramatically, leaving new investors with substantial losses.
If you invest in a stock based on these kinds of false claims, you may be the victim of a pump-and-dump scheme. An experienced securities fraud lawyer can work to recover your investment losses.
Hedge Fund Fraud
A hedge fund is an investment partnership made up of a general partner, who manages the fund, and limited partners, who are the investors in the fund. The limited partners provide money for the fund, while the general partner manages the money to achieve various objectives.
Hedge funds invest in numerous different assets, including:
- Real estate,
- Derivatives, and
Mutual funds, on the other hand, may only invest in stocks or bonds.
Hedge funds are typically more aggressive and risky than mutual funds. Hedge funds are only available to “accredited” investors, which typically requires a net worth of over $1 million. Because of this requirement, hedge funds are lightly regulated. Hedge fund managers can do almost anything they want, as long as they disclose the strategy to the investors. The SEC considers accredited investors as capable of evaluating and taking on high levels of risk due to their high net worth.
The lack of regulatory oversight creates the perfect opportunity for fraud to occur. Hedge fund fraud comes in several forms. It may involve a fund manager making misrepresentations to investors about the hedge fund’s performance or falsely convincing potential investors that the hedge fund is suitable for their financial situation.
Despite the lack of regulation in the industry, hedge fund managers owe their investors fiduciary duties and can be held liable in the event of a breach. The Law Offices of Robert Wayne Pearce P.A., represents clients who have been victimized in hedge fund fraud. Contact us today to talk about your options for recovery.
How Can a Securities Fraud Lawyer Help Me?
Suffering losses in the stock market does not automatically mean you have been a victim of securities fraud. Investing is inherently risky, and sometimes losses occur with no misconduct involved. If you believe you sustained losses due to securities fraud, contact a securities fraud lawyer as soon as possible to review your case.
The Law Offices of Robert Wayne Pearce, P.A., conducts a thorough review of a case prior to acceptance. We will gather information from you regarding your relationship with your financial advisor, your financial sophistication, your investment experience and objectives, your financial condition, and any representations or promises made to you by your financial advisor.
We will evaluate your account statements, correspondence with your financial advisor, marketing materials you received, and any other relevant information. Any information you are missing that is relevant to your claim, we will help you retrieve.
Finally, we will dedicate time to learning the details of your case to determine the likelihood of recovering damages. Attorney Robert Pearce will not accept your case unless he and his team believe you are likely to be successful at a hearing.
The majority of securities fraud cases are resolved through arbitration. Arbitration is quicker and less formal than litigation. Often, it is also much less expensive.
To participate in a FINRA arbitration, you must file a detailed statement of claim with all the information regarding your situation and detailing why you should recover.
After filing your statement of claim, the brokerage firm and/or financial advisor has 45 days to file an answer. This answer will detail their defense(s) to the allegations made in your statement of claim.
For securities fraud disputes, FINRA appoints a panel of three arbitrators to preside over the hearing where both sides present their case. This hearing is much like a court trial.
The arbitrators are also responsible for pre-hearing decisions, such as exclusion of evidence, motions to dismiss, and review of documents.
There is always a chance you will settle your claim before the arbitration hearing. If you aren’t able to settle, however, you don’t want to be left navigating the entire FINRA arbitration process alone.
Although arbitration is less formal than a courtroom trial, it is still a legal process with many moving parts. Thus, it’s important to have an attorney in your corner to give yourself your best chance at success.
Attorney Robert Pearce has appeared as the lead attorney in hundreds of arbitration proceedings and has the experience necessary to zealously present your case.
Attorney Robert Pearce has tried over 100 cases to trial verdict or arbitration award in his career. In this time, he has lost only four cases for investors, gaining the trust and respect of countless happy clients.
Whether your case results in trial verdict, arbitration, or settlement, the Law Offices of Robert Pearce, P.A., will fight for your rights and do everything in its power to get you the results you deserve.
Hear From Our Clients
At The Law Offices of Robert Wayne Pearce, P.A., we believe the ultimate barometer of our success is surpassing the expectation of our clients.
The following clients have direct knowledge of our firm's processes from the inside and experienced our fierce advocacy.
Hear From Our Clients
- “Robert Pearce is part of that unusual breed of lawyers that are able to create empathy with clients and thoroughly adopt their cause”
No half efforts here. He and his group of professionals are outstanding strategists that can execute with precise fervor and unyielding determination. Theirs is a huge wave of facts, research, precedents and preparation, that has impressed me in its thoroughness and creativity, and most importantly with the results. No stone goes unturned and no effort is ever spared. In my book, he and they are those of a very rare kind that one wants to keep for a very long time.- Ramon Flores-Esteves -
- “Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side.”
Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side. He is the consumate plaintiff's lawyer: smart. dedicated, fully able to try a case but a great negotiator in a mediation. He did a wonderful job for us, fully supporting us through the process and more than holding his own against a large national law firm.- Maurice Z. -
- "Mr. Pearce and his staff exceeded all of our expectations."
Mr. Pearce and his staff exceeded all of our expectations. We were able to reach a settlement that was of our complete satisfaction, all within a very smooth, professional and efficient process. Mr. Pearce is now not only our lawyer but our family friend. We highly recommend him and his team!- Severiano L. -
- "For the best fighting chance, Robert Pearce is the lawyer you want in your corner."
This law firm is the real deal. We were so lucky that they took our case as they have so much experience in securities and all the wrongdoing that happens in these investment companies where they mislead you and your money (as in our case) into schemes that are not what you think they are. Mr. Robert Pearce is one of the best lawyers around, a truly professional who will fight for you and will tell you as it is all the time. We could not have gone thru this experience if it was not for all the advice, guidance and support he and all of his staff and associates brought to the game. For the best fighting chance, Robert Pearce is the lawyer you want in your corner.- Astrid M. -
- "He never felt intimidated and his study of the case and perseverance prevailed at all times."
Attorney Robert Pearce was our lawyer in a case against a Brokerage Firm and I'm witness to his ability and intelligence to deal with lawyers from the most prominent law firm in New York which was the key to recovering much of our losses cheered by their negligence. He never felt intimidated and his study of the case and perseverance prevailed at all times.- Jose A. C. -
- "In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars."
No lawyer except Bob said I had a chance of winning. When UBS Lawyers laughingly offered me zero to settle the dispute, Bob became even more determined to prove everybody wrong. Bob was extremely prepared, and always a step ahead of the opposing attorneys throughout the arbitration. In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars.- J. Blanco -
- "Every meeting and phone call was made with dedication and desire to help our family every step of the way."
Robert's team is excellent. They are very competitive in what they do and they are very responsible. Every meeting and phone call was made with dedication and desire to help our family every step of the way. Their professionalism, responsibility and empathy assured us that we were in good hands. Recommend to everyone.- Mayra A. -