Table of Contents
- Securities and Financial Fraud Law Litigation
- Representing the Defendant
- Representing the Investor
- Regulatory Compliance: It’s the Little Things…
- WA Consumer Protection Law applies extraterritorially
- General Solicitation One Week On
- General Solicitation Now Allowed. What’s Required?
- “Fraud victims plot legal strategies for recovery” – The Puget Sound Business Journal
- “Regulators may have missed securities fraud by Kirkland firm” – The Puget Sound Business Journal
- Criminal Profiteering
- Washington State Securities Law Exemptions
- Accredited Investor Defined
- Liability of Stock Brokers
Securities and Financial Fraud Law Litigation
Defrauded investors rely primarily on securities laws for recover. Both the federal and state governments have adopted securities laws. The federal law started with the Securities Act of 1933 (“Securities Act”), passed unanimously without debate after the stock market crash of 1929 led to the Great Depression. The next year the Exchange Act of 1934 was enacted to regulate stock trading. The Securities Act primarily addressed the law regarding issuing stock. It approach was not to limit access to the market by evaluating the merits of the offering, rather it would let the investor decide after full disclosure.
The states began enacting securities laws early in the 20th century. They were called “Blue Sky Laws” because the politicians claimed that stock promoters selling stock that was little more than blue sky. The political impetus of state laws was to prevent the selling of worthless securities. It therefore is generally a “merit” approach. Under state law it is not always enough to give full disclosure, the issuer must also comply with “fairness” rules. In most cases, an offering must comply with both federal and state securities laws.
In order to protect investors, the normal “caveat emptor” (buyer beware) was reversed to “seller beware.” The seller of a security (or fraudulent purchaser) has the duty to disclose all material facts. Usually investor legal actions are by investors who thought they were buying a low risk security only to find out that it was in reality very risky.
State securities laws often provide the greatest protection to investors but require that the security be returned and limit damages to the amount of the net investment plus an interest rate and possible attorney fees.
Representing the Defendant
Tollefsen Law has over 30 years experience with securities litigation. Although the firm focuses on representing defrauded investors, TL also accepts selected securities fraud defense cases. We take cases where the defendant(s) who did not set out to defraud investors. Often plaintiffs overreach in their eagerness to find “deep pockets”. Sometimes the fraud was caused by a rogue officer and the board of directors is attempting to clean up the mess and save the corporation. We can help in these cases. In one case we registered a securities offering for a company while we defended the company in SEC enforcement action.
Representing the Investor
Generally investors are given powerful rights to recover from the perpetrators of investment fraud. Potential defendants include sellers, officers and directors, other participants, and those who materially aid the fraud. Oregon has a significantly higher standard of protection from those who “materially aid” than Washington reaching even to lawyers doing ordinary legal work. Stock brokers and their firms are also liable in certain circumstances. These investment professionals are required to recommend only investments suitable for the investor’s objectives. They are also fiduciaries who must put the client first, particularly before their desire to obtain commissions.
Should you wait to see if the regulators recover your money?
Generally, you cannot expect securities regulators to recover your money. Although the SEC has the authority to get your money back, as a practical matter, it does so only when the defendant is able to pay back the money, which is extremely rare. Washington State regulators do not attempt to recover your money and Oregon does so only on rare occasions.
The securities laws make certain participants and potential supervisors liable if there is securities fraud. Usually recovery is from these individuals if they have “deep pockets” (the ability to pay. You will have to sue these people to recover your money.
Should you sue? Is it worth the time and trouble?
There are a number of things you need to know before you file a legal action. There are several pages of this website devoted to help you understand what is involved in litigation.
Regulatory penalties can be devastating for a company, yet many companies, especially small companies, fail to plan for or devote resources to regulatory compliance. These companies can be confused and incredulous when they become the focus of investigations or sanctions and may delay responding until their very existence is at stake. Proper counsel can help companies understand regulators’ focus which helps them to prepare for and address compliance issues in a timely manner.
Under the CPA an out-of-state plaintiff may bring a claim.against a Washington corporate defendant for allegedly deceptive acts. Similarly, an out:of-state plaintiff may bring a CPA claim against an out-of-state defendant for the allegedly deceptive acts of its in-state agent.