Kurta Law Ohio securities fraud lawyers can answer your questions about broker fraud and misconduct. Securities fraud is a niche area of law, and a commercial attorney is not equipped to navigate the process of pursuing a claim with the Financial Industry Regulatory Authority (FINRA). Our law firm has extensive experience holding brokerage firms accountable for carelessness and outright fraud.
Ohio Investment Fraud Laws
Ohio securities attorneys are experts in Ohio’s “blue sky laws,” which are your state’s securities laws.
Chapter 1707 of the Ohio Revised Code makes laws specific to the purchase and sale of securities in the state of Ohio. Ohio’s securities laws build off of the Federal Securities Act of 1934, which prohibits deceit in the sale of securities.
Chapter 1707 also covers the types of securities and transactions that are exempt from registration and the prevention of manipulative trading strategies, such as insider trading.
The following is an excerpt from the Securities Chapter 1707 – Prohibited Acts:
No person shall knowingly make or cause to be made any false representation concerning a material and relevant fact, in any oral statement or in any prospectus, circular, description, application, or written statement, for any of the following purposes:
- Registering securities or transactions, or exempting securities or transactions from registration, under this chapter;
- Securing the qualification of any securities under this chapter;
- Procuring the licensing of any dealer, salesperson, investment adviser, investment adviser representative, bureau of workers’ compensation chief investment officer, state retirement system investment officer, or portal operator as defined in section 05 of the Revised Code under this chapter; or
- Selling any securities in this state.
The Ohio Investor Recovery Fund
The Ohio Investor Recovery Fund was signed into law in July 2021. If an investor lost money due to a violation of the Ohio Securities Act, they may be able to recoup losses by filing a claim with the fund. However, the fund only pays up to $25,000 or 25% of the amount of the total loss, whichever is less. Investors may be able to recover more with the help of an Ohio securities fraud lawyer.
The Securities Division
The Securities Division of the Ohio Department of Commerce deals with securities rule violation complaints. Ohio can bring administrative actions – like cease-and-design orders – against entities and individuals who engage in securities fraud. In certain cases, Ohio may refer a case to a county prosecutor for criminal prosecution.
Recent Allegations of Ohio Securities Fraud
The following are samples of the types of securities fraud cases where the State of Ohio has brought enforcement actions in order to protect investors.
Alleged $72 Million Investment Fraud Scheme
In April 2023, a group of financial managers in Toledo, Ohio were indicted for an alleged investment scheme. The advisors allegedly used a fraudulent investment firm called Northwest Capital to defraud approximately 200 investors out of $72 million. The firm allegedly persuaded investors to purchase risky alternative investments without disclosing the managers’ conflicts of interest.
Alleged Misrepresentation in the Sale of Securities
An Akron, Ohio man plan pled guilty to misrepresentation in the sale of securities on February 29, 2024. He allegedly solicited two individuals for investments in his company, Property Renovation Group in exchange for promissory notes. He allegedly told investors he would use their $91,500 to purchase, rehabilitate, and sell real estate. Instead, he allegedly used the money to pay for personal expenses. The Ohio Division of Securities referred this case to the Summit County prosecutor. As part of his plea agreement, he returned $91,500 to the two alleged victims.
Allegations Filed Against Facebook
Ohio brought a suit against Facebook in 2021 following allegations that the company misled the public and promoted “offensive and dangerous content.”
Allegations of Misrepresentation and Securities Fraud
An Ohio man was sentenced to 125 months in prison following allegations that he engaged in securities fraud while he served as President of First American Securities. He allegedly recruited clients to invest in United RL Capital Services and misrepresented material information concerning the investments, which he allegedly told investors would finance medical laboratory developments. Instead, the man allegedly used their investments to make “race car-related purchases” and pay tax debts. A judge ordered him to pay $3.4 million in restitution.
How Do I Avoid Investment Fraud?
Investors should keep in mind the following signs of investment fraud, as highlighted on the Ohio Consumer Advocate Page.
- Cold calling: Unsolicited solicitation to invest should be treated with the utmost suspicion.
- Guaranteed investments with no risk: All investments come with some degree of risk.
- Unusual requests: Do not wire money to a personal account and be wary of requests to send money abroad.
- Cryptocurrency: Many modern scams involve opening a crypto wallet. Be aware that these platforms may be fraudulent.
- Unregistered securities: Securities should register with the state and make disclosures concerning the issuer’s business strategy. Contact the Division of Securities Investor Protection Hotline if you are not sure if an investment is registered: 877-683-7841.
- High-pressure sales tactics: You should have time to research an investment. Do not give in to pressure to invest right away.
- Unlicensed financial professionals: Make sure the person you are working with is licensed to sell securities. Ask for their Central Registration Depository number (CRD number) and look it up on FINRA BrokerCheck.
Types of Broker Fraud
Our Ohio securities fraud attorneys frequently see cases that deal with the following types of broker fraud.
Excessive Trading/ Commission Abuse: Securities transactions come with per-transaction fees, also known as commissions. Brokers violate securities laws when they recommend investments purely for the sake of earning more commissions for themselves. Investors should monitor their accounts and say something if they notice signs of excessive trading.
Unauthorized trading: Unless the customer and the brokerage firm have explicitly approved an account for discretionary trading, the investor must authorize each trade.
Selling Away: Brokers should always have any business they conduct outside of the firm approved by the firm. If your broker recommends an investment sold away from the firm, they may be trying to circumvent FINRA’s supervision rules.
Failure to Supervise: Many types of broker fraud involve a failure to supervise. Firms are required to supervise their brokers to ensure compliance with securities laws.
Misrepresentation and Omission: Brokers are not allowed to misrepresent an investment, or omit material information, in an effort to persuade an investor to invest. For instance, brokers must provide information concerning potential surrender fees and associated costs.
Regulation Best Interest (Reg BI) and Unsuitable Investments: Brokers are required to exercise reasonable skill and care when they recommend investments. This expands on the suitability requirements of FINRA Rule 2111, which requires that brokers consider their customer’s financial needs and risk tolerance. Brokerage firms must also do their due diligence to ensure their brokers’ recommendations fit their investor’s needs.
Elder Financial Abuse: Brokers and investment advisors are in a position to access private financial information. Unscrupulous brokers may manipulate their elderly clients into giving them access to funds. In 2018, Ohio expanded the state’s list of mandatory reporters to include investment advisors and accredited financial planners. Mandatory reporters must report suspected elder abuse to Adult Protective Services.
How Do Investors Recover from Securities Fraud?
An Ohio securities fraud lawyer can help you through the steps of FINRA arbitration, which begins with filing a statement of claim. From there, the case may proceed to mediation or arbitration. There is a discovery process that is similar to what you might experience in a civil suit, with a few key differences. Claimants are involved in the arbitrator selection process, and arbitrators serve as the judge and jury for the arbitration cases.
Securities attorneys can help with the arbitrator selection process and even the playing field. Brokerage firms who have experience with arbitration have a leg-up on ordinary investors and will almost certainly come prepared with expert legal representation. It is essential to get a satisfactory result from FINRA arbitration since the arbitration panel’s decision is almost always final and binding.
Contact an Ohio investment Fraud Lawyer
Our securities attorneys offer free case evaluations and only collect a fee if we win your case. Read our recent testimonials and let us know if you have any questions about the merits of your particular case. Contact (877) 600-0098 or email info@kurtalawfirm.com.