California Securities Fraud Laws

Created by FindLaw's team of legal writers and editors | Last reviewed June 20, 2016

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw’s team of legal writers and attorneys and in accordance with our editorial standards.

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With the wide variety of online stock trading sites available these days, almost anyone can sign up for an account and call themselves a day trader. However, making a profit on the stock market is not quite as simple. Most traders rely heavily on tips and advice when buying and selling the stocks in their portfolio.

California securities fraud laws protect traders from advisors utilizing fraudulent tips and advice as a way to swindle traders out of their money. This is a quick summary of the securities fraud laws in California.

Protecting Stock Prices With California Securities Fraud Laws

While protecting consumers from fraudulent advice is an important aspect to California's securities laws, these laws also make it unlawful for traders to manipulate securities in a manner that creates a false or misleading appearance of stock activity. The following table outlines the specifics of securities fraud laws in the Golden State.

Code Sections

California Code - Part 5: Fraudulent And Prohibited Practices

What's Prohibited?

Under California law, it is unlawful for any person, in connection with the offer, sale, or purchase of a security, directly or indirectly, to do any of the following:

  • Employ a device, scheme, or artifice to defraud.

  • Make an untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

  • Engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

It is also unlawful to:

  • Create a false or misleading appearance of active trading in any security;

  • Effect, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading; or

  • Induce the purchase or sale of any security by the circulation or dissemination of information to the effect that the price of any such security will or is likely to rise or fall.

Criminal Penalties

Any person who willfully violates California's securities laws will be fined up to $10,000,000, imprisoned for two, three, or five years, or both. However, no person may be imprisoned for the violation of this rule if he or she proves that he or she had no knowledge of these securities fraud laws.

Civil Liabilities

Any person who willfully participates in any act that violates California securities fraud laws will be liable to any other person for the damages sustained as a result of the act. Damages will be the difference between the price at which the person purchased or sold securities and the market value of the securities at the time of his purchase or sale, plus interest at the legal rate.

If you have been charged for violating securities fraud laws and would like legal assistance, you can contact a California securities fraud lawyer through FindLaw. Visit FindLaw's sections on securities fraud and other fraud and financial crimes for more articles and information on this topic.

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