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How To Prove Securities Fraud

| Jul 24, 2020 | Uncategorized |

Securities fraud takes advantage of investors by giving them misinformation that results in losses. This commonly occurs in financial markets, such as stocks, mutual funds, and accounting fraud. Most investors will not be aware they are victims of securities fraud in Altoona, PA until they lose a significant amount of money. Since markets are unpredictable, a small loss doesn’t mean scam, so an investor may have trouble knowing if they have been a fraud victim.

An investor can look for certain signs that likely point to a securities fraud. A broker could tell investors to watch stock news for entertainment, financial statements show transactions not authorized by the investor, or some of the transactions do not make sense. An investor may pay capital gains taxes, though the money they make decreases. A drastic decrease in stock worth in short time periods could be an indication of fraud.

To bring a case against a broker, the investor has to prove the broker acted carelessly to cause the client substantial loss. The investor may be required to show their reliance on the broker’s information or representation. An indirect evidence or direct evidence can be used to prove reliance, such as a statement claiming the investor have a lucrative contract that does not exist. If the investor made an investment based on that statement, it could be used as proof of reliance.

Fraud-on-the-market may be used as indirect evidence, especially when it makes stock appear to have higher value. Since the investor purchased stock based on the information, it implies the investor relied on it. If a broker makes an omission of a known fact, such as not disclosing a patent being contested in court to investors, it does not require proof of reliance. Courts would commonly see the omission of fact as fraud.

A broker could claim the plaintiff knew the statements were false, and that the investor would have made the investment anyway. A fraud attorney may be able to help investors recover lost funds.