California Securities Fraud Laws
Created by FindLaw's team of legal writers and editors | Last reviewed February 26, 2018
Financial investments, such as stocks and bonds, are collectively known as "securities." With securities fraud, an individual or a corporation manipulates the securities markets through misleading or false information. The fraud might affect the values of securities or result in financial losses to consumers, investors, financial institutions, and private companies. For example, misleading information might result in an inflated stock price if buyers inaccurately evaluate the issuing company's financial health.
Prosecutions for securities fraud happen in both federal court and state court. Under California securities fraud laws, the prosecutor must show that the defendant willfully violated the state's securities laws. In other words, the defendant may have acted intentionally, deliberately, or recklessly. To show the defendant's willful conduct, the prosecutor will likely need to present information regarding the defendant's knowledge of securities laws and regulations.
The prosecutor must also prove that the defendant participated in a plan or scheme to fraudulently affect offers, sales, or purchases of securities. Alternatively, the prosecutor can show that the defendant directly or indirectly permitted the release of a misleading or false statement. Securities fraud might also take place if the defendant deliberately withheld information that would affect offers, sales, or purchases related to securities.
If securities fraud occurred due to a false or misleading statement, or an omitted fact, a prosecutor must establish the materiality of the statement or fact. A material statement or fact is one that is substantially likely to affect investment decisions made by the consumer, investor, or entity.
California Securities Fraud Laws At A Glance
You can find more information on California securities fraud laws by consulting the chart below.
California Corporations Code Section 25400 (fraudulent or misleading transactions)
California Corporations Code Section 25402 (insider trading)
California Corporations Code Section 25540 (penalties)
Securities fraud prosecuted in California state court may result in a fine, imprisonment, or both. The state may penalize a convicted defendant with a fine of up to $10,000,000. A sentence of imprisonment might require 2, 3, or 5 years served in state prison.
If the state convicts an issuer of securities on charges of securities fraud, the potential punishment may increase to a fine in an amount up to $25,000,000.
Defenses can include:
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
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Charged With Securities Fraud? Get Legal Help Today
Securities are governed by both federal and state law and, as you can see, California has significant financial penalties for securities violations. If you're facing securities fraud charges in California, having an experienced criminal defense attorney on your side can make all the difference. An experienced criminal defense attorney can help you evaluate the evidence against you and to challenge weaknesses in the prosecution's case. Reach out to a criminal defense attorney near you today and get some peace of mind.
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