Financial securities are investment items such as bonds, stocks, and debentures. Securities law governs the purchase, sale, and creation of security interests. This area of law also prohibits traders from engaging in shady tactics such as spoofing to make money.
What Is Spoofing?
Spoofing involves quickly placing an order, then canceling it. The intent is to lure investors into buying or selling at a high or low price. This is also called bluffing. The practice was outlawed by the Dodd-Frank Act, which was passed in 2010. By outlawing the practice of spoofing, the Dodd-Frank Act strives to create and maintain a level playing field for both buyers and sellers.
Is Spoofing Similar to Securities Fraud?
Spoofing is similar to securities fraud inasmuch that they both involve illegal actions to quickly make a profit at the expense of unsuspecting investors. Securities fraud occurs when a trader induces an investor to buy or sell commodities based on false information. Victims of securities fraud typically lose money in the investment.
What Kind of Trouble Can I Get Into for Spoofing?
You may face both criminal charges and civil penalties if you engage in spoofing. A trader in New Jersey was criminally charged according to the Dodd-Frank anti-spoofing provision in 2011. The trader was charged with six counts of spoofing and six counts of commodities fraud, both of which are white-collar crimes.
As mentioned above, you can also face civil penalties if you are caught spoofing. Civil penalties for spoofing can range from a trading ban to paying fines.
Can I Be Charged with Spoofing If I Merely Use a Savvy Strategy?
In some cases, yes. Distinguishing between simply using a savvy trading strategy and spoofing can be hard. The government generally looks at illegal market manipulation to hide an intended trade in these situations.
Should I Contact an Attorney If I Am Charged with Spoofing?
Spoofing is a serious white-collar crime. Thus, it is vital to seek the help of a criminal attorney if you are charged with a crime involving spoofing or other form of illegal trading. A attorney will assist you in building a defense to fight the charge or charges.