Understanding Securities Fraud Laws in Texas
- The Spencer Law Firm
- Oct 26
- 4 min read
Financial fraud can devastate both investors and businesses. Texas law takes securities fraud seriously, holding individuals and companies accountable for misrepresentation, insider trading, or deceptive investment practices. Here’s what every investor and business owner in Texas should understand.
What Is Securities Fraud Under Texas Law?
In short, securities fraud occurs when someone intentionally deceives investors by providing false, misleading, or incomplete information related to investments.
According to the Texas Securities Act (Tex. Rev. Civ. Stat. Ann. art. 581-33), it is unlawful to:
Sell or offer securities using untrue statements or omissions of material facts.
Engage in acts that operate as a fraud or deceit in connection with the sale of securities.
Employ devices or schemes intended to defraud investors.
These actions can lead to civil lawsuits, administrative penalties, or criminal prosecution by the Texas State Securities Board.
Common Types of Securities Fraud
Securities fraud can take many forms. Some of the most common include:
Type | Description |
Misrepresentation | Providing false or misleading financial statements or investment details. |
Insider Trading | Using nonpublic information to buy or sell securities for unfair advantage. |
Ponzi or Pyramid Schemes | Paying returns to earlier investors using new investors’ funds. |
Broker Misconduct | Unauthorized trading, churning, or unsuitable investment recommendations. |
Corporate Fraud | Manipulating company stock prices or falsifying records. |
Each of these actions undermines trust in Texas’s business and investment ecosystem.
Penalties for Securities Fraud in Texas
Here’s what Texas law says: Under Section 29(C) of the Texas Securities Act, individuals convicted of securities fraud may face:
Fines up to $10,000 per violation
Imprisonment up to 10 years
Civil liability, including restitution and attorney’s fees
Administrative sanctions, such as license revocation
Beyond legal penalties, reputational harm and loss of investor trust can be permanent.
How Victims Can Pursue Legal Action
Victims of securities fraud in Texas have two main legal pathways:
Civil Lawsuits — Victims may file a private right of action for damages under Article 581-33(A).
Criminal Complaints — Fraudulent actors can be prosecuted by the Texas State Securities Board or the Attorney General’s Office.
To succeed in a civil case, plaintiffs generally must prove that:
The defendant made a material misrepresentation or omission.
They relied on that statement when investing.
They suffered a financial loss as a result.
Recent Trends in Texas Securities Enforcement
Texas regulators have increased enforcement against fraudulent crypto and online investment schemes. For instance, in recent years, the Texas State Securities Board has issued cease-and-desist orders against unregistered digital asset promoters and deceptive “AI investment bots.”
This trend shows that Texas remains one of the most proactive states in policing emerging financial fraud.
Preventing Securities Fraud: Tips for Investors and Businesses
To minimize risk, consider the following best practices:
For Investors
Verify if the investment and the broker are registered with the Texas State Securities Board (TSSB.gov).
Avoid unsolicited offers promising “guaranteed returns.”
Review offering documents and ask for written disclosures.
For Businesses
Ensure all investor materials are accurate and up-to-date.
Maintain transparent financial reporting.
Train employees on compliance and ethical practices.
Key Takeaways
Securities fraud involves deception in the sale or purchase of investments.
Texas law offers both civil and criminal remedies to protect investors.
Victims can recover damages under Article 581-33 of the Texas Securities Act.
Businesses must prioritize compliance to avoid regulatory scrutiny.
The Spencer Law Firm helps clients navigate fraud investigations and defend against claims.
Frequently Asked Questions (FAQs)
1. What qualifies as securities fraud in Texas?
Securities fraud includes any deceptive or misleading act in connection with buying or selling investments, such as false statements or omitted facts.
2. Can I sue for securities fraud in Texas?
Yes. Under Article 581-33(A), victims can file civil lawsuits to recover losses, plus attorney’s fees.
3. Who enforces securities laws in Texas?
The Texas State Securities Board and the Office of the Attorney General oversee investigations and enforcement.
4. Are cryptocurrency scams covered under securities laws?
If the crypto asset is classified as a “security,” it may fall under the Texas Securities Act — especially when tied to investment contracts.
5. How long do I have to file a claim for securities fraud?
Texas law generally requires claims to be filed within three years from the date of discovery of the violation.
Conclusion
Securities fraud cases require swift action and deep legal expertise. Whether you’re an investor who suffered losses or a business accused of wrongdoing, understanding your rights under Texas securities law is critical.
Speak with our Houston securities attorneys today to discuss your situation confidentially and explore your legal options.
Author Bio
Ashley M. Spencer, J.D. Partner & Lead Litigation Counsel – The Spencer Law Firm (Houston, TX). Ashley Spencer has over 15 years of experience litigating complex state and federal matters involving securities, corporate governance, and business disputes. She represents both plaintiffs and defendants in securities litigation across Texas.
This article is for informational purposes only and does not constitute legal advice. For personalized guidance, contact The Spencer Law Firm.