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How to recognize securities fraud and how to prove it

Hubbard Snitchler & Parzianello

You may have seen your investments plummeting recently. If you invested your funds in industries, such as airlines, restaurants or cruise lines, it is no surprise. Yet, if your stocks were in things such as online technology, or supermarket chains, you might be expecting to see the numbers climbing. What if they have not been?

Securities fraud happens more than you may realize. Many people fail to detect it because they do not keep an eye on their investments or the market. Or they do not fully understand the reports their broker sends them. 

Proving securities fraud is not straightforward. After all, you could be losing money because someone is not great at their job. That is not fraud, but bad advice. For it to be fraud, you need to prove someone has purposely given false information or knowingly omitted information. It could also count as fraud if the broker you contract fails to do adequate research and invests your money without sufficient care.

You need to provide either direct or indirect evidence of the information given to you. For instance, your broker writes to encourage you to invest in a new driverless vehicle company. The email says the company signed a lucrative contract with the state to provide a fleet of 500 new school buses when it has not. Or maybe there were issues with a company you invest in that a broker should have known about and failed to communicate to you.

Even if you cannot prove fraud, you may be able to show you were losing money for other reasons, such as a conflict of interest by your investor or a breach of trust.

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