leer

Securities Law

We complied a list of the latest securities laws:

investigations,

lawsuits,

and

settlements

Securities Ligitation is mostly based on the below explained Securities Act of 1933 and the Securities Exchange Act of 1934. Investors have multiple options.

Depending on the specific situation an investor might be able/choose to file a lawsuit on behalf of a certain class of investors either against the company over an alleged specific wrongdoing (like false and misleading statements) or might file a lawsuit on behalf of the company against certain (current/former) directors and officers over their wrongdoing.

While the first scenario is referred to a securities class action lawsuit the second scenario is called a derivative lawsuit. Besides these lawsuits investors might also file lawsuits against the board of directors in case of an unfair takeover, so call deal cases and former and current employees, that participated in the company stock plan, might have the opportunity to file a so called ERISA (The Employee Retirement Income Security Act) lawsuit in case of mismanagement of their investment.

Securities Law - The Securities Act of 1933 and Securities Exchange Act of 1934

The Securities Act of 1933 and 1934 are the cornerstones of Federal Securities Law and build the foundation for investor protection in the United States . While most claims under the Securities Acts are brought as class actions pursuant to PSLRA before Federal Courts, purchasers of registered securities are also able to bring claims under the Securities Acts to ADR . The Securities Act of 1933 is designed to regulated the initial public offering of securities and ensure that investors receive enough significant and material information thereof, whereas the Securities Act of 1934 is intended to regulate the trading in securities which are already issued and outstanding .

a) Securities Act of 1933

Between 1911 and 1933 the securities industry was regulated at state level by so called “blue-sky law” , but due to the financial crisis surrounding the Black Thursday of 1929 and the Great Depression the US congress enacted at Federal Level in 1933 the Securities Act of 1933 or Federal Securities Act . The Securities Act of 1933 focuses on a single regulatory provision and requires that any issuance of securities to public investors be registered by filing a registration statement with the SEC, unless an exemption from the registration exists under the law . Rule 144, promulgated by the SEC under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration   Sections 6,7, and 8 of the Securities Act of 1933 contain a statutory scheme for the registration process . The Securities Act of 1933 is in some respect a criminal statue   and anyone who signs the registration statement is subject to liability under section 11 for any material misstatement or omission therein .   A purchaser of a registered security may sue a single person or jointly the securities issuer, the companies chief executive, financial and accounting officers, each director, underwriter, and each accountant or other experts   under Section 11 of the Securities Act of 1933 when a registration statements contains “an untrue statement of a material fact or omit[s] to state a material fact required to e stated therein or necessary to make the statements therein not misleading”. Section 12 is broader than Section 11 of the Securities Act of 1993   and has two parts. Section 12 (a)(1) provides a purchaser of a registered security the right to bring an action against a person that “offers or sells a security in violation of section 5” .  Section 12(a)(2) take over where Section 11 leaves off and furnishes the purchaser of a registered security with the right to hold any person who offers or sells a security liable, if the purchaser acquired the securities by “means of a prospectus or oral communication” which includes a material misstatement or omission .Section 15 mandates that in general anyone who controls a person liable under Section 11 or 12 is jointly and severally liable to the same extent as the controlled person . Section 17(a), the antifraud provision of the Securities Act of 1933, is a provision of criminal character that covers fraud in the offer or sale of securities . Section 17 is not only limited to the initial offering, but also for fraud in the secondary market . 

b) Securities Exchange Act of 1934

The Securities Exchange Act focus is on the secondary market and the securities market regulation . The Securities Exchange Act of 1934 covers the creation of the SEC, regulation of the stock exchanges and securities firms through the SROs, and other important instruments of the securities industry regulation . It requires brokers and dealers to register with the SEC and regulate their activities . Besides provisions that impose disclosure and other requirements on publicly traded companies , the Securities Exchange Act of 1934 contains a number of provisions that may lead to civil liability of different participants of the securities trading process . In addition to the provisions of the Securities Exchange Act of 1934 there are additional general rules and regulations promulgated under the Securities Exchange Act of 1934. The most important provision for investor protection is clearly Rule 10b5, the securities antifraud rule promulgated under the Securities Exchange Act of 1934 . Every securities transaction lives under its protective shade . Rule 10b5 is very similar to the wording of Section 17(a) of the Securities Act of 1933 . While Section 17(a) covers fraud in the sale or offer of securities, rule 10b-5 covers fraud in the purchase or sale of securities in the secondary market . Typical 10b5 cases include, securities trading, where a party to a securities gives false or misleading information, corporate trading, where a corporate manager induces the corporation to enter into a disadvantageous securities transaction, corporate disclosures, where a corporation issues false or misleading information to the public, insider trading, where corporate insiders either use confidential corporation information to take advantage or tip the information to others, outsider trading, where outsiders with no relationship to the corporation use confidential information about the company to their advantage, and customer- broker disputes, where securities professionals engage in deceptive or other unprofessional conduct.

Rules 10b-5 does not itself specify the elements a plaintiff must show to be entitled to recovery, but the Supreme Court has identified the following elements. A plaintiff has to show that the defendant affirmatively misrepresented a material fact or omitted a material fact that made the statement misleading (material misinformation), that the defendant knew or was reckless in not knowing of the misrepresentation (scienter), that the plaintiff relied on the misrepresentation (reliance), that the plaintiff suffered actual losses as a result of the reliance (causation or loss causation), and finally that the plaintiff suffered damages (damages) . Claims under 10b-5 are today commonly heard in Federal courts after the Private Securities Litigation Reform Act of 1995 (PSLRA) reduce the abuse of the random securities lawsuits in order to address the problem of “professional plaintiffs” and other abusive practices . The Securities Litigation Uniform Standards Act of 1998 (or Uniform Standard Act, “SLUSA”) also preempted the role of state law and state courts. It closes the gap of PSLRA and requires that also claims under Section 11 and 12 of the Securities Act of 1933 be brought in Federal Court , but SLUSA does not apply for individual or derivative lawsuits . While the Securities Act of 1933 was rarely amended, the Securities Exchange Act of 1934 experienced a number of amendments .

If you have any questions or think you have a case or want to report fraud, please do not hesitate to contact us at SanDiego@Thieler-Boeh-Seitz.com

Attorney Advertising: The information presented on this website should never be construed to be formal legal advice or to constitute the formation of an attorney-client relationship. Prior results do not guarantee a similar outcome.

 
 

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