Hire a Securities Lawyer to Protect Your Investments

What Is Securities Law?

Securities are financial instruments that hold financial value, such as stocks, mutual funds and bonds. Securities laws regulate these instruments to prevent fraud, insider training and market manipulation. They also help promote transparency through regular reporting.

The Securities and Exchange Commission requires publicly traded companies to file regular reports. These reports disclose the company’s financial condition, operating results, compensation information and more. As a result, this information helps investors, brokers and the market to shape investment decisions.

Securities Litigation Claims

Securities abuses are predictable depending on the player’s role in the industry. Although, investment losses caused by something beyond the fluctuating marketing can be securities abuses. Investors can make litigation claims to protect themselves from abuses in the future and help make sure investments remain safe.

Insider Trading

Insider trading occurs when a person with private insider company knowledge uses that insight to buy or sell stocks. Brokers, stock analysts, bankers and company employees can have access to sensitive information. It would be illegal for them to use that information because it is not available to most investors.


Fraud claims are against companies for the documents submitted for their public offerings. For example, the claims may refer to fraudulent information within their financial statements and more.

Market Manipulation

If someone interferes with the free and fair market, then this is called market manipulation. Companies, brokers or individual investors can create false appearances about market prices. For example, this includes the market prices of securities, products, commodities and currencies. The Securities Exchange Act of 1934 prohibits this.


Churning refers to brokers who trade using a client’s account to boost their own commission. Investors lose money from excessive broker fees and bad trades.

Trading Without Permission

Brokers need permission to trade for their investors, therefore, they cannot be in direct contradiction with their client’s orders.

Misrepresentation & Omissions

Companies or brokers cannot mislead investors by omitting important information. They also cannot misrepresent or share incorrect information to investors.


It must be remembered that brokers should not make recommendations that do not align with the investor. Investors have known objectives and backgrounds that their investments should match. Incorrect and deceptive advice resulting in losses also warrants an unsuitable malpractice claim.


If a broker sells client accounts and keeps the money, then they are misappropriating funds. In this case, the broker’s firm also bears liability because of negligent supervision.

Breach of Fiduciary Duty

Brokers have access to sensitive information and must provide complete confidentiality. Accordingly, those who violate that trust can bring upon a breach of fiduciary duty claim.

Conflict of Interest

Securities firms do both investment banking and brokerage. Analysts may want to give a stock a stronger evaluation if they are also clients on the banking side. Analysts may also give a lower evaluation of their competitor’s clients. Investors can claim a conflict of interest to recover their losses.

Failure to Diversify

Brokers cannot put all their client’s assets in a single stock or industry because of the risk involved. In order to diversify their client’s portfolio, brokers should invest in different securities options.

Failure to Supervise

Firms must supervise their employees’ trading activities to ensure no significant investor losses. Failure to do so makes the firm liable.

Risky Investments

Stocks with a potential of high returns also have a higher potential of losses. Because of this, brokers must convey to their clients the high risk associated with the investment. They must also get their permission before moving forward.

Proving Securities Fraud

As an investor, it can be difficult to prove fraud because of the way the market naturally fluctuates. Because of this, you should pay attention to significant losses and warning signs and consult an experienced securities lawyer for more help.

Investors must prove the broker misrepresented a material fact, causing losses. Proof must be in the form of direct or indirect evidence.

Direct Evidence

Direct evidence is when an investor makes a decision based on a false statement given by a broker. In this situation, the broker knows the statement’s inaccuracy, but still passes it on.

Indirect Evidence

Indirect evidence refers to the fraud-on-the-market theory, which refers to when misrepresentation inflates stock price. Investors then buy the stock based on the affected price. The investor indirectly relies on the misrepresentation that misled the entire market. Defendants try to show that the misrepresentation did not affect the stock prices. Instead, they may try to prove the investor would have still invested had they known the truth.

When investors claim fraud by omission, they do not have to prove reliance. It is difficult to prove whether the investor’s decision would have been different if she or he had known the facts. For this reason, reliance is presumed to exist. Defendants try to prove that the investor’s decisions would have been the same if they had all the facts.

Securities Arbitration

Arbitration is an alternative to litigation. It only becomes an option if both parties agree to it or have a contract requiring them to do so. The National Association of Securities Dealers controls many of these arbitrations. The NASD requires its members to resolve disputes in arbitration rather than litigation. Mostly all stockbrokers and brokerage firms are NASD members, and they include arbitration in all their contracts with investors, which binds investors to mandatory arbitration to resolve claims.

Arbitration Process

Arbitrations involve a panel of three decision-makers. One has to be a member of the securities industry, and the other two are working professionals such as lawyers or accountants.

The panel considers all evidence presented and makes a decision. Because the panel is already familiar with the securities industry, arbitration moves fast, and it is usually over in about four days. Additionally, investors receive their decisions from the panel within 30 days of the arbitration. All awards are paid promptly as per NASD rules and requirements.

Work With an Experienced Local Lawyer

In short, securities law is complex and it requires a detailed understanding of the laws, regulations and industry standards. With this in mind, hire an attorney with experience pursuing securities claims who can fight for your rights and protect your financial interests.

Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!

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