Ally Financial Investigation Looking into Securities Fraud

Securities fraud – also known as stock fraud and investment fraud – is the violation of securities laws by inducing investors into buying or selling stocks or commodities based on fraudulent or misrepresented information, a practice that results in the investor losing money.

Detroit-based Ally Financial – formerly known as General Motors Acceptance Corporation (GMAC) – is the subject of a securities fraud investigation for possible misconduct regarding the company’s stock.

Ally is being looked at for allegedly executing questionable business actions in selling the company stock. Shareholders who purchased Ally Financial stock dating from April 2014 to the present are eligible to be part of a potential class action lawsuit.

Another common type of securities violations involves the conduct of trustees (persons who are charged with the responsibility of managing a person’s securities). Trustees and brokers have a duty to manage the securities in a prudent manner. A breach of this duty can make the trustee liable for losses resulting from the mismanaged securities.

Examples of securities violations and securities litigation claims include market manipulation, insider trading, breach of fiduciary duty, churning, unauthorized trading, and malpractice or ineptitude.

Market manipulation occurs when a false impression is created about the price, availability or distribution of a security, while illegal insider trading, according to the SEC, refers to “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.”

“Insider trading violations may also include ‘tipping’ such information, securities trading by the person ‘tipped,’ and securities trading by those who misappropriate such information,” according to the SEC.

It is against the law for people with inside knowledge of a company’s stock activity to use that information for personal gain.

A broker or trustee engages in a breach of fiduciary duty if they have a conflict of interest that prevents them from being loyal to the investor.

Churning is the practice of a broker engaging in excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker.

Unauthorized transactions, also known as unauthorized trading, occur when a broker makes trades for a customer without their permission. While trustees and brokers are permitted to exercise some latitude in investment decisions, they cannot make trades contrary to the stock holder’s wishes.

Malpractice or ineptitude is when an unqualified person represents that they are a qualified professional.

The U.S. Securities and Exchange Commission (SEC), in addition to other self-regulated organizations, regulates the public offer and sale of securities.