Securities are legally defined as negotiable financial instruments that have a financial value. As can be seen by this definition, securities can be a complicated area of law. However, it's important to know some basic information about securities law if you're investing your hard-earned cash in securities when saving for the future. FindLaw's Securities Law section provides basic information about this complex area of law. You can find articles that provide an overview of securities law, how to prove securities fraud, the responsibilities of investors and brokers, and a guide to understanding securities arbitration. You can also find links to various resources related to the area of securities law.
Securities Rules and Regulations
Companies and individuals dealing in securities have specific rules and regulations they must follow. Failure to follow these rules can result in criminal and civil actions. Companies that issue securities have strict rules involving the disclosure of information that affects the value of their securities. These companies are required to file multiple documents with the Securities and Exchange Commission (SEC) regarding the value of their company and assets, and are required to follow Generally Accepted Accounting Principles (GAAP).
Similarly, individuals and institutions that are involved in the buying and selling of securities also have to follow strict rules. These broker-dealers have various rules regarding the investment advice they provide to clients. Broker-dealers also have rules relating to the actions they take with their clients' money.
Common Securities Abuses
In spite of the rules and regulations, abuses involving securities continue to occur. These abuses can be perpetrated by companies, broker-dealers, or ordinary people. The most common abuses that can occur with companies issuing securities are: insider trading, fraud, and market manipulation. Insider trading occurs when a person with inside knowledge of the company's business - such as a company employee - uses that information to trade stocks. Claims that a company committed fraud are often related to the company's public offerings. As for market manipulation, this can occur when a company, broker, or even individual investor takes part in certain activities to create a false impression about a security or its trading activity.
Broker-dealers can also commit various abuses in the securities industry. Misconduct committed by broker-dealers includes: churning, unauthorized trading, misrepresentation and omissions, unsuitability, and misappropriation. Some of these acts are self-explanatory, while others aren't as easy to understand. For example, churning occurs when a stockbroker executed excessive trading on a client's account in order to boost his or her own commissions. Unsuitability refers to when a broker makes investment recommendations that run contrary to the known objectives and background of an investor.
Finally, securities abuses can also by committed by people who are not actually involved in the securities industry. Con artists use various tricks and tactics to induce people into fraudulent investment schemes. These con artists usually trick people into investing their savings by promising unrealistic financial returns from oil and gas leases, limited partnerships, or stocks and bonds.
Hiring a Securities Lawyer
It can be hard to know that you've been the victim of securities fraud before losing your investment money. It's important to pay attention to your investment accounts, and investigate if something doesn't seem right. If you feel that securities or investment fraud is occurring in your account, you may want to contact a local securities attorney to discuss your legal options.
