As a business owner, you might not often consider federal securities laws or how they can affect you, your employees, and your business. However, if your business is connected in any way to the securities market, you could face consequences for securities law violations.
These penalties could include fines, incarceration, and reputational harm to your business. Here’s what you need to know.
5 Things to Remember About Securities Law
It’s important to learn about securities law and its impact on your real estate company or other business before violations occur. It can be costly and time-consuming to respond once the U.S. Securities and Exchange Commission (SEC) alleges you have violated federal laws. Five key points to remember about U.S. securities laws include:
1. Securities Laws Are Meant to Protect the Public
At their core, U.S. securities laws are designed to protect individual investors and the public at large from unregulated financial markets. You only need to remember the 2008 Great Recession and other economic downturns to be reminded of the dire consequences that can follow from careless or nefarious behavior.
As a result, the SEC can be aggressive in investigating and prosecuting law violations.
2. Not Just Publicly Traded Companies Are Subject to Securities Laws
Additionally, the reach of securities laws goes beyond publicly traded companies. Private and public companies that issue stocks, bonds, or other securities can all be subject to regulation. Investors who buy and sell securities can also be subject to regulation.
3. Unintentional and Intentional Violations Are Prosecuted
In some contexts, violating the law without criminal intent can be a defense to charges. However, many securities law violations can be punished regardless of whether you intend to violate the law or not. For example, you and your business can face consequences for filing a disclosure with false or misleading information, even if you didn’t mean to do so.
This reality makes it essential for businesses subject to securities laws to take appropriate measures to prevent violations. One director’s or manager’s error can lead to penalties for the entire company.
4. You and Your Business Can Face Penalties for Violations
Remember that some securities laws impose liability on businesses and individuals who commit prohibited acts. For example, the Sarbanes-Oxley Act of 2002 prohibits companies from making false or uncertified financial disclosures. The company, its executive management, and its directors can all face consequences for violating this law.
5. You Should Be Wary of What You Tell Friends and Family Members
Securities laws can affect your friends and family members, even if they do not work for a company that offers securities. For instance, suppose that you give confidential information about your company’s finances to a friend or family member who then, in turn, buys or sells your company’s stock.
In this case, you can be charged for tipping, and your friend or family member can face charges for insider trading. Your friend or family member can face these charges and associated penalties even if their only connection to the company is you.
Learn More About Securities Laws From Alves Radcliffe
The more you know about federal securities law, the better you and your company will be positioned to avoid prosecution. These laws can be complex to understand and apply to your specific situation, so obtaining personalized advice from a skilled securities law attorney is essential.
Whether you are a business owner, an executive of a large company, or an investor who buys and sells securities, the California business law attorneys at Alves Radcliffe can help you understand the law and your responsibilities.
Contact us today to schedule a consultation.
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