What Does a Securities Lawyer Do?

A securities lawyer specializes in laws and regulations that apply to financial investments. These specialists provide significant benefits in planning investments and recovering losses from wrongdoing.

Financial scandals over the past several decades led to widespread economic losses. The most well-known was the collapse of Enron in 2001. This financial debacle involved deceptive accounting practices. It resulted in overinflated stock prices, devastating shareholders and investors.

In another case, MF Global, a major commodities brokerage firm, illegally misappropriated nearly $1 billion. MF Global used customer funds to support its operations before declaring bankruptcy in 2011. The government initiated an enforcement action against MF Global. It recovered around $1.2 billion from the company's assets as restitution.

Cases such as these underscore the need for stronger securities laws and enforcement. Securities lawyers play an instrumental role in corporations' compliance and enforcement actions. They also help individual investors.

Continue reading to learn more about securities laws and how a security attorney can help. See FindLaw's Securities Law section for more articles, including Questions About Securities Law.

If you would like to submit a tip or a complaint about securities fraud or wrongdoing, you can do so at the SEC's Enforcement Tips and Complaints website.

What Are Securities Laws?

Securities laws and regulations govern financial instruments such as stocks, mutual funds, and bonds. These rules are designed in part to prevent:

• Fraud
• Insider training
• Market manipulation

Securities laws also promote transparency through a complex system of reporting and enforcement. For example, federal law requires publicly traded companies to file regular reports with the Securities and Exchange Commission (SEC).

The SEC is the federal governmental agency with regulatory oversight and control of the industry. Congress authorizes the SEC to issue securities regulations. These reports to the SEC disclose information about the company's:

• Financial condition
• Operating results
• Executive compensation
• Other information

Investors and brokers, as well as financial markets in general, rely on the accuracy of such information to shape investment decisions. Federal law also prohibits using insider information for personal gain or market manipulation.

Securities Laws Governing the Securities Industry

Many federal and state laws apply to the securities industry. Federal laws and regulations control most aspects of the securities industry.

Federal securities laws include:

• Securities Exchange Act of 1934: Governs the purchase, trading, and sale of securities
• Securities Act of 1933: Addresses the issuance of securities by companies
• Investment Company Act of 1940: Regulates companies that engage in investing, reinvesting, and trading securities
• Investment Advisers Act of 1940: Regulates firms or sole practitioners compensated for advising others about securities investments. It also ensures that they follow securities regulations.
• Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Sets forth regulations impacting consumer protection, trading restrictions, credit ratings, regulation of financial products, corporate governance for public companies, and transparency in the U.S. securities markets
• Sarbanes-Oxley Act of 2002: Mandated reforms to enhance corporate responsibility, improve financial disclosures, and combat corporate and accounting fraud by financial professionals

State security laws also regulate the securities industry. State securities laws, often called "blue sky laws," govern securities. Each state has its own securities regulators.

Securities fraud or wrongdoing can have devastating repercussions across the economy. This explains the increased relevance of state and federal securities law.

In this regulatory environment, securities lawyers are a significant resource for consumers and corporations. For more information on securities law, see FindLaw's section on Securities Law Basics.

Securities Lawyers Can Benefit Individual Investors

A securities lawyer can play a critical role in protecting individual investors. They can advise you of your broker's legal obligations. Obligations of brokers, financial advisers, and investment advisers can include:

• A duty to determine whether the types of securities recommended are specifically suitable for you
• A duty to disclose all necessary information about any recommended investments
• A fiduciary duty to place your interests above their own

A securities lawyer also can advise you on the common signs of securities fraud. They can help prevent or detect mismanagement of your investments. Securities attorneys can be invaluable.

Claims Available to Investors

A securities lawyer can advise you about claims available to investors. Not all investment losses are actionable. However, you may have a claim for losses that are not attributable to regular market forces. Claims that may be available to investors include:

• Breach of fiduciary duty
• Conflict of interest
• Churning (excessive trading to increase broker's fees)
• Failure to diversify
• Failure to supervise
• Ineptitude or malpractice
• Insider trading
• Market manipulation
• Misrepresentation
• Omission of facts
• Risky investments
• Unauthorized trading
• Unsuitability

A securities lawyer can represent you in any securities litigation arising from your investments. This includes:

• A shareholder's derivative action
• A class action suit
• A suit against your stock broker

Many broker agreements contain arbitration clauses. You may be limited in your ability to pursue an action against your broker in court.

Arbitrating Securities Claims

Arbitrating securities claims against broker-dealers is more common than litigation. FINRA, or the Financial Industry Regulatory Authority, is a nongovernmental organization working under SEC supervision. FINRA's rules govern the arbitration process. The FINRA arbitration process is compulsory; FINRA members must answer claims.

Arbitration is not a court process. A panel of neutral arbitrators decides the dispute. However, having an experienced securities lawyer who best represents your interests is wise.

A Securities Attorney Can Help Corporate Clients

Securities lawyers also represent corporate clients in transactional work. A securities lawyer can help businesses with:

• Structuring initial public offerings
• Facilitating the private sales of securities
• Issuance of stock or other securities and mergers and acquisitions

In this capacity, they also assist companies with compliance. Securities lawyers can guide corporations on securities laws and regulations. These laws and regulations serve to benefit consumer protection.

Talk to an attorney specializing in securities law if you have questions or need legal help.

Contact an Experienced Securities Attorney for Help

Understanding your investments is critical. If you need help with a securities law issue, contact an experienced securities attorney. They can protect your interests. Investigate if something doesn't seem right or if you need help navigating the securities industry.