Securities Law

Securities law involves federal and state regulation of the issuance and trading of securities. Securities law also encompasses securities litigation and enforcement.

Congress developed securities laws in response to the stock market crash of 1929. The laws seek to protect investors by requiring 성범죄변호사 disclosure of relevant information by companies offering securities.

Legal Definition

A security is a financial ownership device conferring a share in the assets or profits of a company. Federal securities laws provide for a system of registration, which gives purchasers access to reliable information and ensures that the selling company is telling the truth about its business, assets, and liabilities. It also provides private causes of action against perpetrators of securities fraud that directly cause a plaintiff financial injury, and for rules to prevent companies from defrauding shareholders through secret information and insider trading.

The legal definition of securities is broad, and encompasses instruments that represent ownership, participation, or debt in any ongoing enterprise. As a result, it is not uncommon for even innovative financial instruments and investment schemes to fall under the purview of securities law.

The SEC is the chief enforcer of federal securities laws, and it investigates claims that companies and brokers are violating the securities regulations. It can interview witnesses, examine brokerage records and trading data, and subpoena any business that is suspected of a violation. Its usual leads are complaints from investors and others, but it is also empowered to conduct surprise inspections. In addition, the agency can pursue enforcement actions in federal court if necessary. Its regulations, court decisions, and no-action letters are arranged on Westlaw under the practice areas of Capital Markets and Securities Enforcement & Litigation.

Transactions

Securities law deals with the rules and regulations governing business transactions and investor rights. It is part transactional (such as a bundle of loans being sold as a security to a financial institution or investment group), part regulatory (such as the issuance of securities is heavily regulated by federal and individual state agencies) and also part litigation (when investors sue over securities fraud).

Federal laws deal with many aspects of securities sales, including prohibiting deceit and misrepresentations in the sale of a security, broker and dealer registration requirements and the ability to bring civil lawsuits against those who engage in fraudulent securities transactions. Individual states have their own securities laws, often called Blue Sky laws, that regulate certain aspects of securities transactions and allow the state’s securities commission to investigate complaints or other possible violations. State blue sky laws also typically include anti-fraud provisions that give private parties standing to sue for civil damages in cases of suspected securities fraud.

Generally, public offerings of a security are highly regulated and require that a full disclosure statement be filed with the SEC prior to the initial offering. In addition, a bank that accepts unregistered securities as collateral for a loan may be considered an underwriter and not exempt from the registration requirements of the Securities Act of 1933.

Regulation

Modern securities law is largely the result of the great stock market crash of 1929 and the depression that followed. The crash prompted Congress to pass the Securities Act of 1934 and create the SEC as the primary federal regulatory body for the issuing and trading of securities. The SEC’s job is to ensure that there is adequate disclosure to allow informed investment decisions by the public. It does not, however, pass on whether a security is worthless or worthwhile, and it cannot prevent the sale of securities that are not registered. Rather, the SEC aims to deter fraud through its regulations and private civil actions brought by non-government plaintiffs who suffered financial injury through a fraud perpetrated on them by the defendants.

SEC regulations are issued as rules and orders, but also through interpretive guidance. Interpretive releases from the SEC are not binding on courts or other agencies, but they can have a considerable influence. They are available on the SEC’s website and through various legal research databases like Bloomberg Law (under “Securities”) and LexisNexis.

The Getting the Deal Through Series is a comprehensive library of practice-oriented materials addressing a broad range of securities transactions and issues. The set includes authoritative treatises, course handbooks, legal forms, program transcripts and answers books, and more. It is a unique, cost-effective way to gain a thorough understanding of the legal and practical aspects of the securities industry.

Litigation

The specialized skills of securities attorneys often are put to the test in litigation. Individuals who believe that they have been harmed by corporate fraud or violations of the law rely on securities lawyers to help them pursue remedies. In turn, corporations rely on securities lawyers to defend them against allegations of fraudulent practices.

In the US, investors who lose money due to fraud may be able to recover some of it through securities class action lawsuits. However, these cases are highly litigious, and the process for distributing funds to harmed investors can take years. In addition, only persons who purchased stock during the case’s “class period” are eligible to receive compensation. The class period is initially determined by plaintiffs’ counsel after thorough research and investigation. The Fifth Circuit recently affirmed that it was permissible for plaintiffs to rely on statistical evidence when trying to prove that the wrongdoers had engaged in “cherry-picking” (choosing particular accounts) in violation of Rule 10b-5 in securities fraud cases.

Wilson Sonsini’s Securities Group is a leader in securities litigation and has received recognition from industry publications, including Chambers USA, BTI Litigation, Law360 and The Recorder. Our team of experienced practitioners is devoted to representing clients on complex and high-stakes matters. We have won significant victories for our clients in class actions, arbitrations and trials, as well as in a wide variety of appeals.