Business fraud occurs at multiple levels. Most consumers have experienced a level of anxiety in dealing with a businesses. For that reason, people ask friends, family members, neighbors, and coworkers for a referral when searching for a contractor, repairman, lawyer, or dentist. Business fraud may also take place in transactions that do not involve direct sales to customers. Corporations may falsify their financial statements, and employees sometimes use their knowledge as insiders to gain an advantage over shareholders and traders in the financial markets. Although most business transactions are executed successfully with positive results on all sides, business fraud is a legitimate concern. When business owners or others face business fraud-related charges in Naples or Broward County, retaining an experienced Fort Lauderdale insider trading attorney becomes critical the moment the charges are filed.
Federal business fraud
Business fraud is described as dishonest or illegal activities that can be perpetrated by an individual, a partnership, or by a company in the interest of obtaining a financial benefit. Business fraud is also often referred to as corporate fraud and may include several types of dishonest activity:
- insider trading
- charity fraud
- online auction fraud
- non-delivery of merchandise
- overpayment scheme
- reshipping scheme
Do not say anything that might incriminate you. Speak with an attorney first.
Individuals who unknowingly work for fraudulent businesses may expose themselves to criminal culpability. Therefore, it is important for employees to speak to a trusted business fraud defense attorney the minute they suspect their employer may be using the company to conduct illegal activities.
When you need an insider trading attorney…
The Securities Exchange Commission (SEC) is charged with investigating a specific type of fraud known as insider trading. An “insider” is a person who either 1) has access to valuable information about a company, and the information is not made available to the public or 2) owns at least 10 percent of the company’s equity. Not all insider trading is illegal. Insiders may legally buy and sell shares of a company that employs them; they may also buy shares of the company’s subsidiaries. However, the law requires these transactions to be registered with the SEC. Illegal insider trading takes place when an insider specifically uses non-public information for personal gain. This type of trading can be done by anyone who has access to insider information: an executive, a company employee’s friend or family member, or even an everyday person who happens to learn the non-public information. An example of an everyday person engaging in insider trading would be an employee at a dry cleaning facility who overhears a company CEO’s conversation about the upcoming earnings report. If the dry cleaning employee executes a trade based on the information he or she overhead, the activity may technically be considered illegal insider trading, and it becomes critical to retain an experienced insider trading defense attorney.
How the SEC can detect it
While most stories of insider trading that make headlines involve large schemes valued at millions of dollarss, many would be surprised to learn the SEC also tracks instances in which everyday people engage in insider trading. The method the SEC most commonly uses to track insider trading is known as the security-based approach. For almost 50 years, the agency has used this approach with great success; therefore, it remains the most widely-used method. A security-based investigation begins when the SEC receives notification from the Financial Industry Regulatory Authority indicating suspicious trading activity ahead of significant news such as a merger or acquisition, corporate event, or other important news that is likely to affect the price of the related security. The SEC follows up on the report by securing “blue sheets,” which contain data that shows who traded the security leading up to the major event. From there the agency proceeds to investigate potential motives.
In addition to the security-based method, the SEC created the Market Abuse Unit (MAU), which created the Analysis and Detection Center (A&D Center), a platform that allows members of the unit to study how traders use information to make decisions. The development of the A&D Center has allowed the SEC to gain new insights that help them detect illegal insider trading. The A&D is staffed by specialists who have experience and training in areas ranging from federal law enforcement to trading strategies and investigative accounting.
Defense representation in Broward County
Illegal insider trading is very unique because it is a serious federal offense of which virtually anyone who trades securities can be accused. Everyday traders may innocently stumble across insider information and use it to their advantage without ever knowing they have committed a federal crime until the government comes calling. Therefore, people who have been contacted by federal government for insider trading or any other form of business fraud should contact a Fort Lauderdale business fraud attorney prior to speaking to law enforcement. While it may be tempting to think the federal government only pursues business fraud charges against high profile business executives, crime ring participants, and celebrities, the SEC utilizes its tools every day to detect small scale traders who may be engaging in illegal activity. Therefore, individuals who respond to the seriousness of a federal business fraud investigation by immediately seeking legal counsel tend to have better case outcomes than those who delay. Contacting a Fort Lauderdale insider trading lawyer now can save trouble in the future if formal charges are eventually filed in Naples or Broward County.