Turning Probabilities Into Realities

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Wells Submission Responses

There are numerous acts that could be considered securities fraud. Below are some examples of the types of conduct that will draw scrutiny from the regulators, including SEC and/or the Texas Securities Board:

  • Misrepresentation (or omissions of material facts) to investors
  • Insider trading and pump and dump schemes
  • Failure to conduct the business plan as promised to investors
  • Misuse or misappropriation of proceeds raised
  • Hiding the true use of funds through manipulation of financial records
  • Grants of stock options to executives that are questionable
  • Pyramid schemes
  • Falsifying documents
  • Questionable timing of executive stock sales
  • Investment adviser misconduct
  • Unsuitable investments
  • Using offshore accounts to inflate reported assets
  • Embezzlement
  • Failure to abide by the securities laws
  • Filing false quarterly or annual reports
  • False press releases
  • Promise of exaggerated returns on investments

Obviously, other conduct could result in a regulatory inquiry, but the above represents common acts that result in investigations and prosecutions. The SEC can freeze assets and will usually initiate an investigation. Other regulators, such as FINRA and foreign state commissioners can also investigate securities fraud. These investigations then become a blueprint for enforcement actions and indictments for illegal acts.

That action could be taken by the Department of Justice (DOJ), and in that case, an assistant US Attorney is generally assigned to the case. One of the fundamental laws in place that provides the investigatory and prosecutorial power to the SEC and the DOJ is known as the Sarbanes-Oxley Act. Sarbanes-Oxley governs these situations in terms of enforcement and penalties. Additionally, individual states carry felony statutes for the commission of a securities violation.

Add the commitment threat of prosecution of mail and wire fraud and it is easy to see how vast the possible ramifications of these enforcement actions can be to an issuer, officers, employees, and directors and others in the “chain” of a wrongful action.

Some of these laws provide for enhanced sentencing based on the amounts fraudulently obtained and the number of victims, and the statutes may also provide enhanced civil restitution in order to force the convicted defendant to repay his or her victims as much as possible. The primary Federal Securities Fraud Statute can be found at 18 U.S.C. 1348. The statute’s language is very broad:

  • Whoever knowingly executes or attempts to execute a scheme or artifice;
  • To defraud any person in connection with any security; or
  • To obtain money or property by means of false or fraudulent pretenses, representations or promises, is guilty of securities fraud.

The Spencer Law Firm is experienced in these cases. The Spencer Law Firm has been lead counsel in developing responses to Wells Submission requests and response strategies for clients involved in alleged violations of the Securities Act of 1933, as amended and Securities Exchange Act of 1934 and other charges by the SEC.

The Spencer Law Firm has organized and structured responses to enforcement and/or criminal investigations prosecuted by the Texas Securities Board, the Internal Revenue Service, the Harris County District Attorney, the New York District Attorney, the Florida Insurance Commission, various foreign state commissions, FINRA, (formerly NYSE and NASD) and the SEC in regards to securities fraud allegations and alleged felonies against our clients.

In order to get an experienced lawyer to assist you with any potential or ongoing SEC, FINRA and Texas State Securities Board matter, contact us today or call us at 713-568-9008.