Securities are stocks, bonds and mutual funds.  These investments are purchased by individuals attempting to make a profit. Stocks are purchased in a corporation and give people part ownership of the company.  The complexity of this area of law is governed by various federal and state regulations that oversee the conduct of investors.   

What Is the Purpose of Securities Law?

Securities law exist because of the confidential and unique information that investors hold. Securities laws and regulations are designed to ensure that investors receive accurate and necessary information regarding the type of value of the interest they invest in when they make a securities purchase. Securities laws also exist to ensure that insiders who have information about securities do not abuse this kind of inside information by making investments on information that has not gone public.

The Securities Act of 1933 was created for two objectives:

  • require investors to receive accurate financial information and other significant information concerning securities being offered for public sale
  • prohibit fraud, deceit, misrepresentation, and other fraud in sale of securities

What Are Some Common Forms of Abuses?

The most common form of abuse today is insider trading. This occurs when a person with detailed information about a company uses the information to purchase or sell stocks. Insider trading usually occurs with brokers, company employees, stock analysts, etc. Furthermore, poor accounting practices are becoming another common form of abuse. This occurs when a company understates its losses or exaggerates its profits. There are also a number of other types of securities abuse, such as securities fraud and spoofing

What Is Insider Trading?

Insider trading is a type of sale of securities by a person within the company who holds inside information that is confidential and has not reached the public.Insider trading is illegal when a person who has inside information trades on that materially nonpublic information in violation of a duty to withhold or refrain from trading. The securities law broadly prohibits fraudulent activities of any kid in connection with the offer, purchase, or sale of securities. These provisions are set for many disciplinary actions brought against anyone who trades or sales securities based on inside information.

What are Some Remedies Regarding Securities Fraud?

Investors have a variety of options if they wish to receive compensation or punish companies/individuals that engage in securities fraud.  These include: 

  • Notify law enforcement – The Justice Department has a long and distinguished history of prosecuting federal securities crimes
  • Begin a class action lawsuit – When many investors are injured by a company¿s abuse of insider trading or poor accounting practices the injured investors can start a class action lawsuit
  • Contact the Securities and Exchange Commission (SEC)

What Steps Can I Take to Protect My Investments? 

There are a variety of steps an investor can undertake.  These include:

  • Be sure your brokerage firm is licensed
  • Check the Central Registration Depository (CRD) – the CRD contains information about brokers and licensing
  • Stay in contact with your broker 

Should I Contact an Attorney?

The law regarding securities is far too complex to understand without an experienced criminal defense attorney to help guide you through the process.  If you have lost significant amounts of money it may be a good idea to contact an attorney and explain your situation.  Furthermore, a statute of limitation bars restitution after a certain time period.  If you believe you may have a case, contact a lawyer immediately.