Chan Rob Les

What Qualifies as a Violation of Securities Law?

Securities are basically financial instruments representing some financial value. They are issued as a certificate that grants its holder rights relating to a business’s profit distributions. Examples of securities include bonds, stocks, and notes.

Usually, securities are exchanged via securities markets. A trading market could be subject to manipulative or unfair business practices, which includes securities fraud and insider trading. A security market is therefore regulated heavily by both state and federal laws.

Securities Violations Types

What qualifies as a violation of securities law? The main securities violation is securities fraud. It occurs when a party resorts to misrepresentation, fraud, or false statements in relation to a security’s sale.

Another common securities violation type entails trustee’s misconduct. Trustees are individuals who are assigned the job of managing an individual’s securities. Brokers and trustees are professionally obliged to manage securities wisely. A violation of this responsibility could render the trustee or broker liable for losses that resulted due to the securities’ mismanagement.

Some other securities violation types and securities lawsuit claims entail:

  • Market manipulation: This could happen when a broker, investor, or securities company functions to create an untrue impression regarding the security’s price, distribution, or availability.   
  • Insider trading: Individuals with inside information pertaining to the stock activity of a firm may employ such knowledge to unfairly benefit on a trade.
  • Fiduciary duty breach: The broker or trustee cannot manage other people’s securities if there is a conflict of interest preventing them from staying loyal to the recipient.
  • Churning: In this case, the broker indulges in excessive levels of trading to boost the commissions of their own sales. This is viewed as unethical and prohibited as per securities laws.
  • Unauthorized trading: Though trustees have some freedom regarding investing reasonably and prudently, they typically cannot trade against the stock holder’s wishes.
  • Malpractice or ineptitude: If an unqualified individual (brokering with no valid license) presents himself as a professional, broker malpractice may happen.

The laws that govern these securities violations types could vary as per the nature of the security being traded. Laws could be, for instance, different for regulating stock trading and trading of other kinds of securities.

The securities trade domain is regulated strictly by state and federal laws. If you are a SEC whistleblower or have indulged in any kind of securities violation or dispute, getting in touch with a business lawyer would become necessary. An experienced SEC whistleblower attorney would research laws that apply to your area to ascertain if there are any available defenses.