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Fraud Offences Articles

What Happens for a First Offence of Investment Fraud?

investment fraud

If you or a loved one is facing a first time investment fraud allegation, experiencing an overwhelming mix of emotions, plus urgency to start your legal response, is completely natural. Investment fraud is a very serious offence and it is treated equally as seriously by English courts, so promptly appointing an experienced defence solicitor is essential. This article aims to unpick what happens in a first time investment fraud case. We outline the legal elements of investment fraud, provide some examples, explain sentencing for first-timers, and weigh imprisonment risks. We also outline how to get in touch with our team for robust legal assistance if your case looks like it is going to proceed.

What is the offence of investment fraud?

Investment fraud is an offence under the Fraud Act 2006 and Financial Services Act 2021 in England and Wales. It involves dishonest misrepresentations to induce investment decisions.

The most common investment fraud offences include fraud by false representation, fraud by failing to disclose information, and illegally operating fraudulent schemes.

For a conviction, the prosecution generally must prove:

  • The defendant dishonestly made false statements or failed to disclose material information about an investment.
  • This was done to make a gain or cause loss through the victim’s investment actions.
  • In some cases, the operation of a fraudulent investment scheme.

Penalties can include unlimited fines and up to 10 years’ imprisonment. Cases typically involve technical complexity, meaning prosecution often occurs in the Crown Court. Sentencing will account for factors like the number of victims and losses caused when determining fines and imprisonment terms.

Financial regulators like the Financial Conduct Authority (FCA) and Serious Fraud Office (SFO) play a major role in investigating and prosecuting cases of investment fraud.

What are some examples of investment fraud?

Examples of this offence include:

  • Ponzi schemes – funds from new investors used to pay ‘returns’ to earlier investors to create the illusion of legitimate profits.
  • Pump and dump – artificially inflating the price of an asset through false information to sell holdings at higher value.
  • Insider trading – trading on confidential information not available to the general public for unfair advantage.
  • Churning – excessive trading in client accounts by brokers solely to generate commissions.
  • High pressure sales tactics – intimidating or misleading clients into purchasing unsuitable investments.
  • Over-valuation – deliberately inflating the net asset value of holdings to attract investment.
  • Fees and commissions – charging excessive management fees to clients regardless of investment performance.
  • Unauthorised trading – executing transactions without client approval to earn profits on the trades.
  • False advertising – using misleading claims about past returns to entice new clients and funds.
  • Rogue brokers – unlicensed individuals selling fraudulent or high-risk schemes to unsuspecting investors.
  • Affinity fraud – exploiting membership of specific groups to appear trustworthy and lure investment.

What happens if you are suspected of committing investment fraud in the UK?

If you are suspected of investment fraud in the UK, specifically under English law, you are most likely to face investigation and potential prosecution under laws like the Fraud Act 2006 and Financial Services Act 2021.

Here’s a general outline of what could happen:

  • Initial investigation – if investment fraud is suspected, the Financial Conduct Authority, police or other relevant authority will begin an investigation. This may involve examining trade records, account statements, emails, and other evidence. You may be interviewed under caution where anything you say could be used as evidence later. Having a solicitor present is advisable.
  • Arrest or voluntary interview – you could be arrested or asked to voluntarily attend an interview at a police station or FCA office. Even if voluntary, this is serious and may result in charges. Legal representation is recommended.
  • Charging decision – after investigating, authorities will consult the Crown Prosecution Service (CPS) on whether to charge you based on sufficiency of evidence and public interest.
  • Court process – if charged, your case may be tried in the Magistrates’ Court or Crown Court before a jury.
  • Sentencing – if convicted, the court will consider various factors when determining your sentence. While maximum penalties depend on the offence, non-custodial sentences are possible for first offences depending on circumstances. Potential options include fines, community service, or suspended sentences.

If you are facing such accusations, consult a reputable investment fraud solicitor immediately as the exact process depends on your specific situation and there could be serious personal and professional consequences.

What is the sentence for investment fraud in the UK?

Investment fraud involves scams that induce investors to put money into fraudulent schemes, artificially inflated assets, or nonexistent opportunities. It is prosecuted under the Fraud Act 2006, Financial Services Act 2021, and other laws, depending on what activities constituted the alleged fraud in the first place. Typically, the maximum sentence to be faced is 10 years’ imprisonment.

Aggravating factors like large scale fraud, sophisticated operations, targeting vulnerable victims, and abuse of authority can lengthen sentences. Mitigating factors, such as a guilty plea, cooperation with authorities, no previous convictions, showing remorse, or having acted under duress may reduce them.

In addition to fines and asset seizure, the Financial Conduct Authority (FCA) can impose bans, withdraw operating licences, and restrict promotions.

Are there any defences to investment fraud?

Here are some potential defences that can be raised in response to allegations of investment fraud:

  • Lack of intent – the prosecution must prove that you had dishonest intent and willfully engaged in investment fraud. If you can demonstrate that any misrepresentations or deceptive practices were unintentional, made in error, or due to a genuine misunderstanding, this could provide a defence.
  • Insufficient evidence – skilled defence lawyers will carefully assess the strength of the prosecution’s evidence, looking for inconsistencies, unreliable witnesses, or gaps in the evidence chain. Challenging the sufficiency of evidence and raising reasonable doubt can be an effective defence strategy.
  • Good faith and due diligence – if you can show that you acted in good faith and exercised due diligence in conducting investment activities, this may serve as a defence. It is crucial to demonstrate that you took reasonable steps to verify information and make informed investment decisions.
  • Reliance on professional advice – if you can demonstrate that you relied on professional advice, such as financial advisors or experts, and the investment fraud was a result of their misrepresentations or wrongdoing, this may serve as a defence. It is important to establish that you acted in good faith based on the advice provided.
  • Lack of personal involvement – if you can establish that you were not directly involved in the investment fraud scheme or that you had no knowledge of the fraudulent activities, this may serve as a defence. It is crucial to demonstrate that you were not complicit in or aware of any fraudulent behaviour.
  • Coercion or duress – if you can demonstrate that you were coerced or under duress to engage in investment fraud, this may serve as a defence. You must establish that the coercion was immediate or imminent and that you had no reasonable alternative.

Investment fraud is a serious offence with significant legal and financial consequences, not just for the person being prosecuted, but for their families, businesses, and other stakeholders as well. If you are facing allegations of investment fraud, seeking immediate legal advice from an experienced fraud solicitor is essential so that you can understand the specific defences available to you and to navigate the legal process effectively.

Will I go to prison if it is my first time committing investment fraud?

Predicting whether a first time investment fraud offence could result in imprisonment is difficult, as numerous factors are considered during sentencing. The scale and sophistication of the scam are key considerations – large deceptions involving multiple victims are viewed extremely harshly. The losses caused to investors and damage to public trust in markets will also be assessed, with substantial impacts increasing chances of custody.

Mitigating factors like admissions of guilt, cooperation with investigations, demonstrating remorse and attempting to repay investors, may assist first-time offenders in arguing against immediate prison. Skilled defence solicitors can present these factors to potentially warrant a suspended sentence instead.

All that said, aggravating factors like false accounting, obstructing probes, involvement in organised financial crime, or abusing authority point towards harsher punishments, even for first-time offenders. While judges can give a suspended sentence for some opportunistic scams, they are very reluctant to do so for deliberate large-scale investment frauds given the gravity of the crime.

Anyone facing prosecution should obtain expert advice from an experienced investment fraud defence lawyer on realistic prospects of imprisonment based on in-depth analysis of comparable cases. This provides the best opportunity to avoid a custodial sentence through robust presentation of mitigating factors.

Where to get further help

If you or someone you care about is facing prosecution for investment fraud, specialist legal advice early on could make all the difference. For those without prior convictions, charges might even be able to be dropped before going to trial, in some cases. Contact Stuart Miller Solicitors today for a free consultation.

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