Securities Law: What it Means and When You Can Use It

WHAT ‘SECURITIES LAW’ MEANS

If you own a business or invest, you need to know what securities law is and when you might need a securities attorney. Securities law consist of the state and federal laws that regulate the securities industry. This industry includes the nation’s stock and options exchange as well as the electronic securities market. These rules put the onus on companies to disclose accurate information to their investors and established ground rules against unfair trading.

Securities law came about after the Great Crash when share prices on the New York Stock Exchange completely collapsed in 1929. The Great Depression followed and so did the growing sense that securities needed regulation. The United States Congress went to work on legislation to address the frivolous speculation that led to the market’s implosion. A series of laws were passed over the next decade. This included the Securities Exchange Act of 1934 that created the Securities Exchange Commission. This federal agency is responsible for the enforcement of federal securities law. By proposing rules and regulating the securities industry, the SEC has made a safer and fairer market. The body of securities law have changed over time through amendment and case law. If you need to further understand the rules and standards governing the securities industry, consider consulting a securities attorney.

WHEN YOU CAN USE IT

Whether you are a broker, investor, or business owner you must beware any possible violation of securities law or commission rules. Common violations that lead to SEC investigations:

    • – Misrepresentation or omission of important information about securities

 

    • – Manipulating the market prices of securities

 

    • – Stealing customers’ funds or securities

 

    • – Violating broker-dealers’ responsibility to treat customers fairly

 

    • – Insider trading (violating a trust relationship by trading on material, non-public information about a security)

 

    – Selling unregistered securities.

When one of these violations is reported, the Commission will file a complaint with a U.S. District Court and ask the court to apply a sanction. Often the Commission will request a court order, called an injunction, prohibiting the party under investigation from carrying out any further acts or practices that violate the law or Commission rules. This injunction may also require audits be done, accounting for frauds take place or even special supervisory arrangements. In addition, the SEC can seek civil monetary penalties or the return of any profits made illegally. The court may also suspend or even bar an individual from serving as a corporate officer or director of a corporate entity. If the party were to violate the court’s order, they may be found in contempt and be subject to additional fines or imprisonment.

FINAL WORD

These are serious repercussions. If you engage in the exchange of securities, it may be useful to consult with a securities attorney to ensure full compliance with securities law or consider filing a suit with a company that has violated them. Navigating the complex regulatory system around securities requires an intimate knowledge and expertise you can only get from professional experience.

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