Securities Laws and Regulations

For many individuals, securities are an excellent growth vehicle for their retirement savings, or so most thought.  In light of the recent economic downturn, which was partially spurred by illegal corporate actions and representations, investors saw their retirement savings and other invested assets plummet in value.  Naturally, the regular ebbs and flows of the market are expected, risk is absorbed by an investor, and sometimes, losses do occur with no individual party held “at-fault”.  However, if investment losses stem, even in part, from illegal securities practices by brokers, brokerage firms, financial analysts, and even, corporations themselves, legal action can be taken to recoup your losses, as well as other damages including interest on the funds and costs associated with litigating securities claims. 

Federal Laws Governing Securities Law

As a response to the catastrophic impact the stock market crash of 1929 and the ensuing economic fallout, the federal government passed two important pieces of legislation, the Securities Act of 1933 and the Securities Exchange Act of 1934.  Both acts sought to curb abuses, illegal, and unethical securities trading practices by individuals, traders, brokers, and corporations, which at the time, many people considered to be the main cause of the Great Depression, which actually had reached its lowest point in 1933.    To date, these Acts, which also established the Securities and Exchange Commission (SEC), actively regulate and oversee the securities industry including controlling companies offering securities and regulating overall trading, buying, and selling practices regarding any security.  Following major corporate fraud scandals in the late 1990’s and early 2000’s, such as the WorldCom, Enron, and Conseco, further federal legislation was enacted to protect investors, which included the Sarbanes-Oxley Act of 2002 and the Private Securities Litigation Reform Act. 

What Protections Do Federal Securities Laws Offer Investors?

Through existing federal, and even state, securities laws and regulations, investors are offered a number of protections from unethical or illegal practices by both corporations and brokers.  In most cases, violating any one of these laws is grounds for an investor to file a claim against the liable parties and potentially recoup their losses. 

Common claims filed against brokers, include:

  • Breach of fiduciary duty, which is a general claim that might involve any number of the illegal acts mentioned below
  • Churning, or excessively trading an investor’s account to accumulate fees and commissions
  • Unauthorized trading, or a broker making financial decisions on behalf of an investor without following the regulatory conformation procedures for each transaction
  • Unsuitability, or placing an investor’s funds into an investment vehicle not suitable for their age, assets, acceptance of risk, or overall investment goals
  • Misrepresentation or Omission of information influencing the final decision of an investor to make a given trade, sale, or purchase of any security

Common securities law claims filed against corporations include:

  • Fraud, which can entail any action meant to deceive the public regarding the status, outlook, and procedures of an individual corporation
  • Market manipulation, which entails attempting to illegally raise or lower share prices of an entity through dissemination of fraudulent information
  • Insider trading, which is an illegal practice of the purchase or sale of securities for personal gain in light of their personal insight or information regarding a given security

How Can a Securities Lawyer Help?

Depending on the circumstances of your case, most brokerage firms and other financial entities have already limited your litigation abilities through new customer agreements.  More often than not, these contracts have clauses mandating all disputes enter immediately into arbitration.  Having a securities lawyer represent your claims during arbitration is essential to obtaining a favorable outcome.  Additionally, securities lawyers can pursue claims against corporation, potentially through class action suits, which will pit you against a legion of corporate attorneys in most cases.  Clearly, having an attorney, or team of attorneys, representing your claims in these cases is necessary.