Pennsylvania Securities Fraud Attorney

Securities fraud encompasses a broad array of efforts to mislead, defraud, or otherwise embezzle investors through the stock and securities market. Practices like unsuitable investment recommendations, failure to conduct due diligence, insider trading, and more all fall under the umbrella of securities fraud in Pennsylvania.

Wolper Law Firm protects investors from fraud, financial scams, and inappropriate investment practices. We have recovered millions for our clients and helped them hold bad brokers accountable. If you believe you have been the victim of a securities fraud scam, contact a Pennsylvania securities fraud attorney with our offices today to see how we may be able to help.

Common Forms of Securities Fraud in Pennsylvania

Investment fraud is on the rise nationwide, and Pennsylvania is no exception. The Federal Trade Commission (FTC) has released new data that shows consumers have lost more money than ever before—more than $10 billion—to overall fraud in 2023. This represents a 14% increase in reported losses since 2022. Additionally, more money was lost specifically to investment scams (over $4.6 billion) than any other category reported, representing a 21% increase from the prior year.

The following are some of the most common types of securities frauds to be on the lookout for in Pennsylvania:

Investment Schemes

• Ponzi Schemes: Ponzi schemes solicit investors for an opportunity that may or may not exist. Regardless, while some investors are paid out dividends, these funds come solely from new investors’ payments, not from any actual profit generated. Eventually, the scam artist disappears, holding onto the bulk of funds entrusted to them.
• Pyramid Schemes: Pyramid schemes are similar to Ponzi schemes, with the additional pressure on investors to find and solicit other people to pay into the alleged opportunity. These schemes collapse when recruitment slows, leaving most participants with substantial losses.
• High-Yield Investment Fraud: High-yield investment fraud promises investors high returns with little to no attached risk. These scams often use sophisticated marketing techniques to lure unsuspecting investors and are frequently linked to Ponzi or pyramid schemes.
• Affinity Fraud: Affinity fraud relies upon bonds of trust between certain communities to enroll them into Ponzi schemes, advance fee scams, or other kinds of securities fraud. Groups targeted might include veterans, members of the same religious congregation, immigrants, or other shared affinities.

Market Manipulation

• Insider Trading: Insider trading is one of the most pervasive and hard-to-track kinds of securities fraud. Certain trades and sales are illegal when they are based on non-public information in the stock market. For example, an executive who dumps their company stock ahead of the release of a damaging environmental impact report—information they had access to before it was public—would be committing insider trading.
• Pump and Dump Schemes: Pump and dump schemes are an example of illegal market manipulation. In this scheme, a stock or security’s price is artificially inflated through social media buzz, industry hype, celebrity endorsements, or other disingenuous efforts. Once investors have been lured to buy in, the stock is “dumped,” or sold at the artificially high price, by those behind the scam. This leaves everyone else holding low-value or valueless stock.
• Microcap Fraud: Microcap fraud involves manipulating thinly traded companies, or microcaps. Scam artists might share fraudulent information, conceal or change reports, or inflate prices to mislead investors.

Financial Misrepresentation

• Accounting Fraud: Accounting fraud involves purposeful omissions of liabilities or debts to misrepresent the profitability of a venture. By presenting false or misleading financial statements, perpetrators can attract investors or manipulate stock prices.
• Unregistered Securities: The sale of unregistered securities is often abused by scam artists to make illegal offerings or sell securities with very little or no data available about their performance or profitability. Without proper registration, these securities offer limited transparency and increased risk to investors.
• Material Misrepresentation: Brokers who omit critical information such as a company’s financial health, substantial risks, or history of fraud may be committing material misrepresentation to make a sale. This type of misrepresentation is not only unethical but also prosecutable as a kind of securities fraud.

Fraudulent Practices by Financial Advisors

• Unsuitable Recommendations: FINRA-registered brokers and financial professionals are bound by industry standards to make only suitable recommendations for investments to their clients. Recommendations that fail to consider key factors such as a client’s age, liquidity needs, or investment experience can lead to substantial losses and may result in arbitration or lawsuits.
• Breach of Fiduciary Duty: Not all financial professionals are bound by the fiduciary duty standard, but those who are must legally put their clients’ interests ahead of their own. This includes making trades and recommendations that benefit clients, acting with confidentiality, and protecting clients’ financial needs. A breach of fiduciary duty is both unethical and actionable.
• Unauthorized Trades: Unauthorized trades occur when a broker or dealer buys or sells stocks in their client’s account without prior consent or authorization. This may also involve forging their client’s signature or impersonating their client to execute transactions.
• Churning: Churning refers to generating excessive account activity to earn commissions. This practice not only depletes the client’s investment account but may also be linked to unauthorized trades, as brokers try to maximize their earnings at the client’s expense.

What Legal Protections Do Pennsylvania Investors Have?

In addition to federal regulation through the Federal Trade Commission and SEC, Pennsylvania citizens also are protected by state-specific regulation. The Pennsylvania Department of Banking and Securities (DoBS) investigates Pennsylvania fraud schemes and oversees state-chartered banks, credit unions, consumer lenders, and brokers. Additionally, the Pennsylvania Securities Act of 1972 regulates the sale of all securities throughout the state.

Pennsylvania companies may not sell securities to more than two investors in Pennsylvania within a 12 month period without registering or filing with the DoBS. Certain exemptions exist under Title 10 of the PA Code, such as for newly formed companies within 6 months of corporation, when the sale of securities is to five or less persons. However, in order to qualify for exemptions, no one affiliated with the issuer may have been previously convicted of securities law violations.

Penalties for Violating Securities Laws

In the state of Pennsylvania, securities fraud schemes may be prosecuted as a second-degree felony. Conviction is punishable by up to 10 years imprisonment and a securities fraud penalty of up to $1 million. Additionally, federal violations of Section 17(a) of the Securities Act of 1933 carry fines of up to $10,000 and the possibility of five years imprisonment.

How Do You Report Securities Fraud?

Reporting securities fraud typically involves communication with the SEC or Pennsylvania Attorney General. The Pennsylvania DoBS Consumer Offices can help you file a complaint and create a written record. However, simply reporting the instance of fraud to a securities regulator will not necessarily help you recover stolen funds. You may need to work separately with a securities fraud lawyer in order to file a FINRA claim or lawsuit to make your case for recovery.

In order to report securities fraud, you will need documentation of the issue, including any paperwork you have signed related to the purchase or sale of the security. Keep a record of any and all communications you have had with your broker or financial representative, as well as attempts you have made to contact them that have gone unreturned or unanswered. Bring all of these, as well as any reports you have made to supervisors or regulatory entities, to your first meeting with a securities fraud attorney.

Do I Need An Attorney If I’ve Been the Victim of Securities Fraud?

Working with a securities fraud lawyer can help you gain the best chance at financial recovery after a fraud scheme. While reporting the fraud can raise a red flag about a brokerage or firm, your securities lawyer will be the only professional on the case who is dedicated to your own personal recovery after reporting fraud. They will help build documentation, advise you about what avenues for recovery are most feasible, file your claim on time and accurately, aggressively pursue compensation, and remain in communication with federal and/or Pennsylvania investigators. If necessary, they can represent you throughout FINRA arbitration, mediation, and negotiations, as well as in the courtroom.

What to Expect During the Legal Process

Every claim is different because of the details involved. However, in general, securities fraud lawsuits follow several steps:

• Case evaluation: Bring all relevant documentation to your consultation with an attorney. Our firm can advise you about what evidence is missing that would strengthen your claim, how to report accurately, as well as what avenues toward recovery are open to you.
• Filing: Your attorney will assemble your claim and file accurately in either FINRA for arbitration or in the appropriate jurisdiction for a lawsuit.
• Discovery: Both sides will have the opportunity to conduct the discovery process. In a trial, the opportunities for discovery are broader and can involve subpoenaing witnesses. In arbitration, there is a limited scope of evidence that can be presented.
• Negotiations: Settlement negotiations or mediation may be able to resolve your claim successfully prior to the final courtroom trial.
• Hearing or Trial: After the hearing, the arbitrator(s) or judge will determine your award amount. After FINRA arbitration, there is no possibility for appeal; for this reason, among others, it is especially important to arm yourself with the best representation in order to ensure that no mistakes are made when arbitrating your fraud claim.

Protecting Yourself: Resources for Investors in Pennsylvania

Always do your own research on investment opportunities before agreeing to send money. Useful resources for investors include the Investment Adviser Public Disclosure and FINRA BrokerCheck. These tools allow you to perform a background check on brokers, advisors, and firms and help you spot scams before you are taken advantage of.

Get Help From a Pennsylvania Securities Fraud Attorney

Wolper Law Firm has won millions for our clients prosecuting investment fraud cases. We are available for a complimentary and confidential consultation about your Pennsylvania securities fraud claim. Contact us today to see how we may be able to help.