Under the federal securities laws, a company may not offer or sell securities to investors without registration with the SEC. However, there are a number of registration exemptions that ultimately expand the universe of potential investors. Many exemptions require that the investment offering be made only to persons who are […]
Securities Law Dictionary
Five-Year Statute Applies to Claims for Disgorgement
The Supreme Court ruled [June 5, 2017] that claims for disgorgement brought by the SEC are governed by a five-year statute of limitations. The Court’s unanimous opinion in Kokesh v. SEC, No. 16-529, slip op. at 5 (U.S. June 5, 2017) (Sotomayor, J.), held that disgorgement, as it is applied […]
Churning – Definition and Cases
Churning – in a churning claim, the customer alleges that the broker purchased and sold securities solely to generate commissions, without regard to the customer’s investment objectives or goals. In the typical churning case, the customer must prove: 1) that the broker controlled the account; 2) that the trading was […]
SEC’s Fast Answers – Rule 504
Rule 504 of Regulation D provides an exemption from the registration requirements of the federal securities laws for some companies when they offer and sell up to $1,000,000 of their securities in any 12-month period. A company can use this exemption so long as it is not a blank check […]
SEC Fast Answers – Rule 506
Rule 506 of Regulation D Rule 506 of Regulation D is considered a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Companies relying on the Rule 506 exemption can raise an unlimited amount of money. There are actually two distinct exemptions that fall under […]
Who regulates the stock market in the US?
The stock market has many different regulators. The primary regulator is the Securities and Exchange Commission. The stock exchanges are governed by their own organizations, under the direction of the SEC. Stock brokers and brokerage firms are regulated by the Financial Industry Regulatory Authority (FINRA) which was formerly known as […]
What is a Security?
A security is a form of ownership in an entity. While some believe that in order to be a security the instrument must be traded on a market, the legal definition of a security is much broader. The definition is important, because if the instrument is a security, then the federal and state securities laws apply to the purchase and sale of that instrument. We define and explain the different types of securities
FINRA – Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority, known as FINRA, is a private corporation which is known as a “self regulatory organization.” meaning that is has the authority to regulate its membership. FINRA’s main functions are FINRA Enforcement and FINRA Dispute Resolution FINRA is the primary regulator for the securities industry, and […]
Control person liability requires culpable participation.
Control person liability does not lie unless the controlling person was, in some meaningful sense, a culpable participant in the fraud. General deficiencies in supervision, are insufficient, liability requires culpability regarding specific trades and misrepresentations. Wallace v. Buttar, 02 Civ. 4297(RWS) (S.D.N.Y. 1/8/03). Appealability * Award Challenge * Vacatur of […]