A Florida man and his accomplice are facing 23 felony counts of securities registration violations, broker-dealer violations and securities fraud.

The men allegedly raised $1.6 million from local investors for a shell company — a medical malpractice insurance company in Florida that apparently was not registered or licensed. The men apparently solicited investments from their social circles, including church. Many families invested tens of thousands from their retirement savings accounts.

Securities laws are intended to ensure a level playing field that is fundamental to the integrity and fair functioning of capital markets. For that reason, a stockbroker is legally required to give potential investors accurate information about any risks associated with a recommended investment.

In this case, the men’s failure to disclose that the recommended investment was essentially a shell company — unlicensed and unregistered — most likely constitutes a material misrepresentation and/or omission. In addition, they may also find themselves liable to the wronged investors in a civil lawsuit.

For investors who are wronged by stockbroker misconduct, a common forum is securities arbitration. Binding arbitration is a forum that many investment or brokerage firms require investors to contractually agree to as their sole remedy for any claims of negligence, fraud, or misconduct. Here, however, it is unclear whether the men required their investors to sign such a contract agreeing to binding arbitration.

If you believe you are the victim of securities fraud or stockbroker misconduct, an experienced securities fraud attorney can help you pursue all available legal avenues of recovery. Even if you only have questions regarding a broker’s or firm’s compliance with securities laws, an attorney can ensure your rights have been protected by all applicable requirements.

Source: wishtv.com, “2 face securities fraud charges,” Joseph Pete, Feb. 1, 2013

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