California Securities Fraud Lawyer
California securities fraud lawyers advocate for investors who have lost money as a result of unsuitable investments. There are federal laws as well as state statutes that are designed to protect investors, and the California securities attorneys at Kurta Law have comprehensive knowledge of the statutes that may help your case.
California Securities Laws
California state securities laws support and enhance the investor protections that already exist under federal rules and regulations. The Department of Financial Protection and Innovation (DFPI) oversees securities transactions in the state of California. The Securities Unit of the Corporate Fraud Section investigates criminal securities fraud cases that are referred to law enforcement by regulators. Criminal securities fraud cases can result in a prison sentence. Kurta Law California investment attorneys handle civil complaints through FINRA – penalties in civil cases may involve arbitration awards for the investor but do not carry prison time for the brokers.
The California Corporate Securities Law of 1968
The California Corporate Securities Law of 1968 regulates securities transactions in California. The law states that all securities sold in California must be either qualified with the Commissioner of Corporation or exempted from registration by a specific Rule of the Commissioner or specific law.
The law states:
“It is unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in the light of the circumstances under which the statements were made, not misleading.”
California Corporations Code 25400 also specifically prohibits stock market manipulation. For instance, it is illegal in the state of California to knowingly execute transactions to create a false impression of market interest in a particular share, specifically for the purpose of persuading other investors to purchase shares. These types of cases may be litigated by state regulators while being simultaneously prosecuted in criminal courts.
In June 2023, a California jury convicted two brothers who conducted a pump-and-dump scheme for a company that sold at-home Covid-19 tests. The brothers were found guilty of using boiler rooms to cold-call potential investors and shill the company’s penny stocks. By increasing purchases of the shares, the brothers made the price of the company’s stock increase, allowing them to sell their shares for an inflated amount.
Examples of Securities Fraud
The following are a few examples of broker fraud that should prompt a call to a California investment fraud lawyer.
- Unsuitable investment recommendations in which a broker does not consider basic facts about the investor, such as the investor’s age, risk tolerance, and liquidity needs – i.e., how soon the investor might need the money they have invested. These types of recommendations violate FINRA Rule 2111.
- Misrepresentation about an investment, or the omission of critical facts such as fees and maturity dates, violate FINRA Rule 2020 as well as California state securities law.
- Commission abuse is another commonly cited type of broker fraud in FINRA arbitration cases. Brokers may recommend an investment – like a mutual fund, a variable annuity, or an alternative investment – simply for the sake of the commission. Similarly, investors may execute an excessive number of trades in order to generate higher commissions for themselves. Each transaction comes with a fee for the broker, creating an incentive for the broker to execute more trades, even though the investor will end up paying unfair and unnecessary broker fees.
- Elder financial exploitation is a rampant securities fraud issue in California. Because elder investors tend to have more money, they are ripe targets for unscrupulous brokers. In elder abuse cases, senior investors might trust their broker to make withdrawals on their behalf, or they may agree to an overly risky investment that their broker recommends – perhaps a margin account that uses risky leverage to purchase securities and generates significant fees for the brokerage firm. Sadly, in some cases, a victim of this type of elder financial exploitation will not report their broker’s misconduct due to a perceived friendship.
These are just a few examples of the types of securities fraud investors may encounter.
Combatting Elder Abuse and Securities Fraud in California
The DFPI promotes investor education through initiatives like the Seniors Against Investment Fraud (SAIF) program. SAIF publishes investor alerts so seniors know to look out for certain investment frauds and scams that target seniors. California also provides guidance on how to report elder financial exploitation.
California FINRA Arbitration Hearings
Most brokerage firms in California require investors to sign a pre-dispute arbitration clause, which means that investors must go through either FINRA mediation or arbitration to recover investment losses.
California has three FINRA arbitration hearing locations. They are located in Los Angeles, San Diego, and San Francisco. If it is advantageous for the client, a California investment fraud attorney may arrange for the hearing to take place outside of the State. In many cases, it is possible to have FINRA hearings via Zoom.
Hiring a California Securities Fraud Lawyer
Speak to a California securities fraud attorney to determine if you have a case. Kurta Law securities attorneys work on a contingency basis, meaning they do not earn a fee unless you win a settlement. No matter where you live in California, investment fraud attorneys will evaluate your case and make it their mission to win a fair settlement. Call (877) 600-0098 for a free case evaluation.