Securities litigation is a very specialized area of legal practice that involves complex securities laws. Many securities lawsuits involve sensitive and confidential corporate information and substantial awards if the legal challenge is upheld. These cases may result in stiff penalties and negative publicity.
Given what is commonly at stake with many securities cases, it is generally advisable to secure a knowledgeable attorney with plenty of experience in securities litigation. However, the following information can give you a general idea of what to expect with securities litigation.
What is Securities Litigation?
Securities litigation is a broad term that encompasses all legal cases that pertain to the federal and state regulation and enforcement of securities laws. Securities laws broadly prohibit fraudulent activities related to the offering, purchasing, or selling of securities. Insider trading, or when a person trades a security while possessing non-public information, is prohibited under securities laws.
The federal entity responsible for regulating securities is the Securities and Exchange Commission or SEC. This organization is authorized to bring a legal action under securities laws to protect investors and ensure that the markets remain free. The SEC regulates the sale, purchase, reporting, and registration of securities, and this body has the authority to take action when illegal conduct may injure US investors. Securities litigation may include any of the following types of violations or areas:
- Class action securities litigation
- Breach of fiduciary duty claims
- Market manipulation
- Claw-back actions by receivers and trustees
- Accounting irregularities, such as falsified financial statements
- Corporate control disputes
- Director and officer liability cases
- FDIC actions against failed banks and their officers or directors
- Inaccurate or incomplete disclosures
- Going-public or going-private transactions
- Internal investigations
- Mergers and acquisitions
- Corporate control litigation
- Shareholder derivative litigation
- Violations of federal and state securities laws
- White-collar securities defense
- Internal compliance policies
- Corporate transactions
- Bribery, kickback, and corruption issues
- Cryptocurrency crimes
- Cybersecurity breach cases
- Internal SEC investigations
- Stock fraud issues
Securities litigation focuses on legal liability defined in the following laws:
- The Securities Act of 1933
- The Exchange Act of 1934
- The Investment Advisors Act of 1940
- The Investment Company Act of 1940
- Sarbanes Oxley Act of 2002
- Dodd-Frank Wall Street Reform and Consumer Protection Act
- The Racketeer Influenced and Corrupt Organizations Act (RICO)
- The Foreign Corrupt Practices Act (FCPA
Securities litigation intersects with many issues that impact other areas of business or law, such as accounting, international transactions, antitrust, and bankruptcy.
How do Securities Cases Work?
Securities litigation can arise for many reasons, ranging from a breach of fiduciary duty to insider trading. At the federal level, civil enforcement for violations of securities laws is undertaken by the SEC. However, the SEC may alert the Department of Justice to investigate the case if criminal activity is suspected. If found guilty, there may be a range of civil and criminal damages, including penalties, fines, jail time, permanent injunction, loss of license, loss of ability to conduct business with the government, and disgorgement orders. In addition, each case requiring an investigation may be brought before a US district, state, or federal court.
Some common securities cases include:
- Market Manipulation: These cases arise when a securities company, investor, or broker creates a false impression of a security in relation to its price, availability, and distribution.
- Insider Trading: These cases arise when an individual uses confidential information to gain a personal advantage during a trade.
- Class Action Lawsuits: A class action, or securities fraud class action, is filed by multiple plaintiffs. Usually, these cases are brought by investors who bought or sold publicly traded securities during a specified time frame and suffered adverse financial effects related to the defendant’s violation of securities laws or other fiduciary duties.
- Breach of Fiduciary Duty: These cases allege that a broker or trustee cannot manage the securities due to a conflict of interest that would prevent them from remaining loyal to the beneficiary.
- Churning: Churning occurs when a broker carries out excessive amounts of trading to boost their sales commissions, which is unethical and prohibited by securities laws.
- Unauthorized Trading: Unauthorized trading occurs when a trustee abuses their freedom to invest prudently and engages in trading against the wishes of the stockholder.
- Malpractice or Ineptitude: These cases arise when an unqualified individual represents themselves as a professional, such as brokering without the required licensure.
As you can see, securities litigation can become quite complex. And with your company’s name on the line, you must secure the best legal representation possible. For more information about Securities Litigation, contact Grellas Shah today.