Both Texas and the federal government have laws that govern the crime of securities fraud. The crime involves engaging in any kind of fraudulent or deceptive practice dealing with the sale of securities. This includes dealing in securities in any way without being a registered dealer or agent or dealing in securities issued after September 6, 1955 and not being registered or having a permit to do so.
||Texas Securities Fraud Statute (Texas Civil Code Annotated, Section 581-29)
|Elements of Securities Fraud
In the white collar crime context, securities fraud can be committed when a corporate officer or director makes a statement that misrepresents, withholds or distorts information relating to the company's stock (i.e. its value), the officer or director unlawfully discloses that information and an individual or entity acts on that unlawfully disclosed information.
Example: The director of Corporation X discloses to a stockbroker at a major stock brokerage firm that his company will be acquiring a very large competitor and that therefore, he expects the value of his stock to increase dramatically. Acting on this unlawful information, the stockbroker goes out and purchases a large quantity of stock in Corporation X. The director of Corporation X and the stockbroker have committed securities fraud.
There is a five-year statute of limitation under Texas securities fraud law. This means that after the date the offense is committed, prosecutors have five years within which they must bring charges for the crime, or the defendant cannot be charged with the crime.
- Lack of knowledge
- The high managerial agent of the corporation performed his/her due diligence to ensure that securities fraud was not committed
- The agent was a registered dealer or agent in the security
- No one acted on the disclosed unlawful information
|Penalties and Sentences
Securities fraud is a felony in Texas. The degree of severity of the felony will depend on the total amount of money involved. (NOTE: Prosecutors may aggregate the amount involved from several smaller incidences or offenses and create one larger charge for securities fraud.)
If the offense has less than $10,000 at issue, then the charge will be a third degree felony. The sentence for a third degree felony is two to ten years in a state prison and/or a fine of up to $10,000. If the offense is for $10,000 or more but less than $100,000, then the penalty will be a charge of second degree felony. This carries a sentence of two to twenty years in a state prison and/or a fine of up to $10,000. Finally, if the offense is for $100,000 or more, the defendant will be charged with a first degree felony. This carries a sentence of up to life in prison or for not less than five or more than ninety-nine years in a state prison and/or a fine of up to $10,000.
If the defendant has been issued a "cease and desist" order asking him/her to stop performing fraudulent activities in dealing with securities and the defendant violates this order, he/she may face a charge of a state fail felony. This is punishable by a fine of up to $5,000 and/or a jail term of up to two years in a state prison.
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.
Get Professional Help With Your Securities Fraud Charges
Securities fraud prosecutions can be very complicated. Evidence is often complicated and highly technical. In order to mount an effective defense you'll likely need the assistance of a professional, who will be able to challenge the evidence against you and act in your best interests. Get started today by contacting an experienced Texas defense attorney near you.