Securities fraud is a broad term for various crimes that involve some form of market manipulation involving financial instruments such as stocks, bonds, and other securities. There are many ways that participants can engage in securities fraud including investor fraud, insider trading, false advertising, and accounting fraud, among other violations.
Like any form of fraud, securities fraud can involve a misleading statement. For instance, an attorney works with a promoter in a scheme to create and sell public shell companies with no real business. When the attorney prepares the SEC filings, the filings contain misrepresentations, stating that the companies are owned by various individuals and are legitimate businesses.
Because securities fraud is governed by both federal and state laws, legal actions can be initiated by private investors or by a government agency such as the U.S. Securities and Exchange Commission (SEC). Thus, depending on the circumstances, a fraudster can be charged with crimes under federal law, New Jersey law, or both.
New Jersey Securities Fraud Laws at a Glance
The chart below provides a summary of statutes related to New Jersey securities fraud laws, including links to important code sections.
Elements of the Crime
Sales and Purchases: It is illegal for any person in connection with the offer or sale of any security to engage in the following:
- To employ any device or scheme to defraud;
- To make any untrue statement of a material fact or to omit a material fact in order to make the statements not misleading;
- To engage in any act, or course of business which operates or would operate as a fraud or deceit.
- To fail to deliver the "Securities Act of 1933" prospectus to each purchaser of a security registered under that act.
Prohibited activities involving securities:
- Quoting a fictitious price
- Effecting a transaction in a security which involves no change in the beneficial ownership of the security for the purpose of creating a false or misleading appearance of active trading in a security or with respect to the market for the security;
- Enter an order for the purchase of a security knowing that an order of substantially the same size and at substantially the same time and price for the security has been or will be entered by or for the same person for the purpose of creating a false or misleading appearance of active trading in a security or with respect to the market for the security;
- Employ any other deceptive or fraudulent device or scheme to manipulate the market in a security.
Possible penalties may include a permanent ban from trading securities, incarceration and/or fines. The actual penalties will depend on the specific circumstances of the case.
- Racketeering: New Jersey Statutes 5:12-125
- Embezzlement: New Jersey Statutes 2C:20-3
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.
New Jersey Securities Fraud Laws: Related Resources
Discuss Securities Fraud with a New Jersey Attorney
If you're being investigated for violating New Jersey's securities fraud laws, then you probably want to get a handle on your case right away. Your freedom, security, and reputation are at stake. Don't delay discussing your case with a criminal defense attorney who can mount a solid defense on your behalf.