Securities law is the area of law dealing with securities, which is the generic term for shares of stock, bonds and debentures issued by corporations and governments to evidence ownership and terms of payment of dividends or final pay-off. They are called securities because the assets and/or the profits of the corporation or the credit of the government stand as security for payment. However, unlike secured transactions in which specific property is pledged (like a mortgage or car), securities are only as good as the future profitability of the corporation or the management of the governmental agency.
Both federal and state laws regulate securities. Federal securities laws are generally administrated by the Security and Exchange Commission (SEC) which was established by the Securities Exchange Act of 1934. The other two main federal laws are the Investment Company Act of 1940 (“Investment Company Act”), and the Investment Advisers Act of 1940 (“Advisers Act”).
In addition to the federal laws, there are also state laws that govern securities. These laws are commonly known as Blue Sky Laws, which typically give the investor who loses money or is defrauded in the securities markets far greater protections than are available under the federal laws.
What provisions are provided under the Securities Exchange Act of 1934?
The Securities Exchange Act of 1934 requires that issuers, subject to certain exemptions, register with SEC if they want to have their securities traded on a national exchange. Issuers of securities registered under the 1934 Act must file various reports with SEC in order to provide the public with adequate information about companies with publicly traded stocks. The 1934 Act also regulates proxy solicitation and requires that certain information be given to a corporation’s shareholders as a prerequisite to soliciting votes. The 1934 Act permits the SEC to promulgate rules and regulations to protect the public and investors by prohibiting manipulative or deceptive devices or contrivances via mails or other means of interstate commerce.
What provisions are provided under the state securities laws?
Typical provisions of the state securities “Blue Sky Laws” include prohibition against fraud in the sale of securities, registration requirements for brokers and dealers, registration requirements for securities to be sold within the state, and sanctions and civil liability. A majority of states, with the exception of New York and California, have adopted the Uniform Securities Act, at least in part.
Should I hire a lawyer?
Complaints against brokers hit an all-time high of 8,945 in 2003 as a result of the industry’s scandals, inclucing shoddy Wall Street research, accounting shenanigans, illegal fund trading schemes, fund breakpoint failures and questionable mutual fund sales practices. The SEC is in the midst of a complete examination of how funds are sold and how firms and their brokers are compensated. The NASD is currently investigating the appropriateness of fee-based accounts and variable annuities sales. This trend is not due to change anytime soon. As a result of the increasing numbers of complaints and regulations constantly changing to enforce compliance, stock brokers, brokers, brokerage firms and others in the securities industry should retain the services of a securities law attorney whether or not you are facing a legal situation. Investors should also retain the services of a securities lawyer to advise them on their legal rights in investing before considering an investment.