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Securities Fraud Laws in Florida: A Primer

Securities fraud in Florida is a major concern of prosecutors across the state. As securities and financial transactions increase in both complexity and frequency, the opportunities for securities fraud increase in Florida. Following is what you need to know about the laws surrounding securities fraud in Florida.

Basics

In general, the intent of securities laws in Florida are to ensure that tips and advantages enjoyed by those who participate in the various securities markets in the state are fair and above board. Broadly, the intent of securities fraud laws in Florida is to penalize people for

  • employing any device, scheme, or artifice to defraud, or
  • obtaining money or property using a false statement of a material fact or an omission of a material fact that would tend to mislead an investor, or
  • engaging in any transaction, practice, or course of business that operates as a fraud or deceit upon its customers.

What is a security?

Under Florida law, a security can be one of several financial instruments, including

  • stocks,
  • bonds,
  • certificates of deposit,
  • commodity warehouse receipts,
  • certificate of interest in a mining lease,
  • an investment contract,
  • a profit-sharing agreement, and
  • a receipt for a security.

However, several common instruments are specifically exempted by Florida law, including

  • securities issued by the government,
  • securities issued by national savings and loan banks and national savings banks,
  • federal land banks,
  • international banks in which the United States is a member, and
  • securities issued by railroads or public utilities.

Transactions that are exempt under Florida law include

  • sales due to death or insolvency,
  • sales due to court-administered reorganization (bankruptcy),
  • security for a bona fide debt or securing such a debt, and
  • isolated sales of securities on behalf of a vendor who isn’t also the underwriter or issuer.

 

Publications

Also covered under Florida’s securities fraud laws are a wide range of publications. Publishing communications that describe securities in exchange for payment or some other consideration without disclosing the payment of that consideration and its amount is also prohibited by the Florida statutes covering securities fraud.

Penalties

Penalties for securities fraud in Florida are strict. A conviction for securities fraud in Florida is a third degree felony, punishable by up to five years in prison and a fine of up to $5,000. However, if the securities fraud involves five or more individuals and involves securities totaling $50,000, a conviction is a first degree felony, which could lead to up to life in prison and a fine of $15,000.

Rather than a fine based upon statute, judges in Florida have the option of assessing a fine to those convicted of securities fraud in Florida of no more than the greater of three times the gross value gained by the securities fraud or three times the gross losses caused by the securities fraud. The court may also add court costs and the reasonable costs involving investigating and prosecuting the securities fraud.

Should the court assess such fines, the monies collected are deposited in the Anti-Fraud Trust Fund. Florida established the fund to pay for investigation and prosecution of fraud in Florida, as well as funding public education efforts about fraud.

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