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Securities fraud cases involve somewhat foreign terminology and details of investment activity that are not necessarily in the scope of most people’s daily lives.
First, the term “security” is a ‘term of art’ under the law and within businesses. In most cases, the term simply means either an ownership interest in a company, such as a stock, or loaner’s interest in either a company or a public project, such as corporate or municipal bonds. There are also securities relating to the right to collect revenue from a mine or oil rig.
Second, the term”misrepresentation” means just what it sounds like. That is, when someone sells any type of security that person has a duty under the law to avoid misleading investors. This is because the law acknowledges the complexity of securities transactions as well as the lack of familiarity persons have in this arena.
Third, a broker is simply someone who arranges the sale of securities to customers.
Fourth, the terms “customer and investor” are virtually identical in this area of the law.
So how does this apply to the case against the Attorney General?
Specifically, the Texas Securities Act requires brokers to ensure that their license to sell securities does not lapse. This is cited under section 29(i) of the Texas Securities Act. Further, the Act also requires brokers to avoid misleading investors. This is cited under 29(e) of the Act. This means that Texas treats the discussions, representations, promises, and written materials within the sale of a security as secularly sacrosanct. That is, such conversations should not include deception or ambiguity. Also, under TEX.REV.CIV.STAT. ANN. art. 581–29(C) it is illegal to (1) engage in any fraud or fraudulent practice; (2) employ any device, scheme, or artifice to defraud; or (3) knowingly make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
Federally, deceptive conduct regarding securities is also prohibited. Under 18 USC 1341 and 1343, it is illegal to deceive persons using mail or wire systems. While mail and wire fraud are not exclusively used to prosecute deceptive securities transactions, they certainly could be. Also, the Securities Exchange Act under 15 U.S.C. § 78j(b) states:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange…(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”
If you are facing either state or federal securities fraud violations, give us a call at (817) 203-2220.