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What are possible avenues of recourse for stockholder fraud?

Anyone who decides to invest in a company should do so with their eyes wide open. All investments, regardless of how good they may seem, carry with them the inherent risk of not yielding a return. However, there are times when investors place their trust and their funds in what turns out to be a certain money loser. This happens when a person or an entity perpetuates stockholder fraud.

So how can victims of fraud seek justice in stockholder lawsuits? The Securities and Exchange Commission has Congressional authorization to offer remedies to help in the recovery of funds. While the SEC’s ability to do this is limited by the specific circumstances of a given situation, the following are avenues of recovery that could possibly be employed.

  • Through a private class action lawsuit, wherein private citizens, rather than the SEC, bring legal action to court.
  • Through a receivership where the SEC appoints a receiver to protect and recover the ill-gotten funds obtained by the defendants. This can occur when a civil court action is filed by the SEC against an entity or a person.
  • Through protections offered by SEC rules as well as the Securities Investor Protection Corporation.
  • Through orders made in administrative hearings or civil courts for defendants to pay back some of the ill-gotten funds. This process, known as “disgorgement,” may also be accompanied by court orders to create a fund for later disbursement.

It must be noted that use of these mechanisms does not guarantee that you will fully recover your losses from being defrauded. You may receive a fraction of your money back, or none at all. This is why, when seeking financial restitution for losses incurred through stockholder fraud, it is important to understand all of your options.

If you believe a person or an entity has victimized you through a fraudulent investment, you may want to seek the counsel of a Florida business litigation attorney. An attorney may be able to look at the specifics of your case and determine possible ways of recovery.

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