What Types of Misstatements or Omissions are Typically Involved in Fraud Cases? - Transcript

Fraud cases in the securities industry often hinge on misstatements or omissions that significantly impact an investor’s decision-making process. These misrepresentations or omissions must be material—meaning they relate directly to the investment decision and have the potential to cause financial harm. At Malecki Law, we understand the complexities involved in proving fraud and are committed to helping investors seek justice.

Materiality is a key component in any fraud case. A misstatement or omission is considered material if it would influence a reasonable investor’s decision to buy, sell, or hold a security. For example, a broker falsely claiming that an investment is risk-free or guaranteed could lead an investor to make a decision they otherwise would not have.

Not all false statements rise to the level of fraud. For instance, minor inaccuracies or statements unrelated to the investment—such as personal anecdotes designed to build trust—may not meet the materiality standard on their own. However, a series of seemingly minor misstatements can collectively establish materiality if they create a pattern of deception that influences an investor’s decision.

Fraudulent misstatements in the securities industry can take many forms, including:

• Guarantees of Returns: Claims that an investment will yield a specific return, especially when the investment involves inherent risk.
• False Representations of Safety: Statements suggesting that an investment is risk-free or insured when it is not.
• Mischaracterization of Assets: Providing inaccurate information about the underlying assets of an investment.
• Exaggeration of Performance History: Overstating past performance to create a false impression of reliability or success.

These types of statements can mislead investors into making decisions that result in significant financial losses.

Omissions—the failure to disclose material information—are another critical aspect of fraud cases. Even if a broker provides some accurate information, withholding important details can create a misleading impression. For example:

• Failing to disclose conflicts of interest, such as commissions or incentives tied to recommending certain investments.
• Omitting known risks associated with an investment.
• Withholding information about the financial health or stability of the issuing company.

Omissions often work in tandem with misstatements to create a deceptive narrative, making it difficult for investors to make fully informed decisions.

Proving fraud requires more than demonstrating that a misstatement or omission occurred. Investors must also show that:

1. They Relied on the Misstatement or Omission: The false or incomplete information must have influenced their decision to invest.
2. They Suffered Financial Damages: The misrepresentation or omission must have directly caused financial harm.

For example, if an investor purchases a security based on a broker’s claim that it is low-risk, and the security subsequently suffers significant losses due to undisclosed risks, the investor may have grounds for a fraud claim. This connection between the misstatement or omission and the investor’s losses is critical in building a strong case.

Fraud cases often involve efforts to build undue trust through false representations. Brokers may fabricate personal connections or share untrue anecdotes to establish rapport with investors. While these statements may not always be directly material to the investment decision, they can contribute to an overall pattern of deception that undermines the broker’s credibility and strengthens the fraud claim.

Fraud cases require careful analysis and strategic advocacy to prove materiality, reliance, and damages. At Malecki Law, we have extensive experience investigating and litigating securities fraud cases. Our team works diligently to uncover the evidence needed to establish a strong claim, including analyzing communications, financial records, and other documentation.

If you believe you have been misled by material misstatements or omissions, contact Malecki Law at (212) 943-1233 or reach out online to schedule a consultation. We are committed to helping investors recover their losses and hold fraudulent actors accountable.

Transcript:

That are typically found in fraud cases are those that are material to your investment decision so a lot of people think oh he said XYZ or she said XYZ that was totally false and that may be true and it may be false and it’s wrong to say false things but a fraud case requires that some materiality that what they told you related to the investment that it somehow caused you to make the decision to invest you reasonably relied on that misstatement and it caused you damages so while one could say that there are a number of smaller misrepresentations maybe not as material that put together would be material they said they moved they went to the same College as me they said they knew my sister before she passed they said XYZ and so there could be a number of things that were inspired to create trust that should not have been given but generally a fraud case it has to be there has to be a fraudulent misstatement or an Omission so they say something that’s true but they owe me to say something else that is material to know along with the true fact and that’s what fraud cases are really made of.