August 21, 2019

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Securities Law

Securities are documents that represent that the holder (owner of the security) has an interest in a company, either as an ownership interest (owning a portion of the company, otherwise called equity) or as a debt interest (the company owes the holder money).

Common Equity Securities include:

  • Common Stocks (the most typical stock held)
  • Futures (a contract to buy or sell stock in the future)
  • Options (the right to buy a security in the future)
  • Derivative Contracts (where its value is based on the performance of another asset)

Typical Debt Securities include:

  • Bonds (a loan to the company from the holder)
  • Debentures (an unsecured bond)
  • Banknotes (a promissory note made by a bank)

There are also hybrid securities including:

  • Convertible Bonds (a bond that may be changed to common stock)
  • Equity Warrants (an option to purchase a certain number of shares at a given price at a certain time)
  • Preference Shares (stock, but with a priority to company assets in the event of bankruptcy)

Securities Exchange Commission (SEC)

The buying and selling of securities is quite complicated and regulated by both the states and the federal government. For example, the Securities Exchange Commission (SEC) has regulatory authority over many securities matters and the power to investigate and take action against any violations to mandated policies.

Securities Law Firms have Attorneys specializing in these matters. If you suspect you have been the victim of investment fraud you should contact Broker Fraud Lawyers who have extensive experience on how to pursue matters involving investor fraud. Similarly, if you are a broker or securities trading firm under investigation you should contact specialized SEC Lawyers in your area from the Digital Law Firms network of qualified professionals. View qualified Securities Law Firms to find Securities Lawyers to get help with this process.

Required disclosures

In order to ensure that investors (purchasers of securities) have accurate information, the federal and state governments have enacted a series of laws, sometimes called blue sky laws that require sellers to register their offerings and sales, and provide information to investors (disclosures). These disclosures may be filed with state agencies (often the Secretary of State or Attorney General) as well as the Securities and Exchange Commission (SEC), and may take various forms, including:

  • Articles of Incorporation (identifying ownership and management when the company was established)
  • Prospectus (a disclosure with an initial public offering – IPO)
  • Quarterly, Annual or Biennial Report (reports that provide information on the status of the company)

Prospectuses and other reports typically provide the following information:

  • Balance sheets (with details of the company’s assets, liabilities and equity)
  • Earnings statements
  • Cash flow information


Perhaps the area of greatest concern to investors is fraud. Typical securities fraud involves:

  • Misrepresentation
  • Investor Fraud or Investment Fraud
  • Broker Fraud
  • Insider Trading

Misrepresentation is more common and occurs when sellers or buyers of securities fail to give all necessary information or make false statements about important aspects of the security to be exchanged.

Broker Fraud, Investment Fraud or Investor Fraud are similar, but more egregious misrepresentations about critical aspects of the investment, its nature, support, or financial soundness.

Insider trading occurs when someone who is an “insider” in a company (like a vice-president) uses secret information (that the general public does not know) to either trade in securities, or give it to another who trades in securities, with the goal of benefiting from that inside information.

Related areas:

Contract Law, Fraud, Business Law, SEC Lawyers, Broker Fraud, Investment Fraud, Investor Fraud