Posts in category: Securities Law

The U.S. Securities and Exchange Commission (SEC) is the federal agency that enforces the nation’s securities laws, which are essential to maintaining the integrity and stability of the United States’ financial markets. Accordingly, the SEC has broad powers to investigate individuals and businesses believed to have violated these laws.

As the Bernie Madoff scandal, the Great Recession of 2008, and several other financial calamities demonstrate, things like greed, a lack of accountability, or simple carelessness can lead to tremendous economic harm. As a result, intentional and unintentional securities law violations can lead to significant penalties.

Watch for These Three Common Securities Law Violations

Securities laws apply to public and private companies that issue securities, the employees and directors of such companies, and anyone who buys, sells, or trades securities. Any one of these individuals or entities can commit a securities law violation. 

Three of the most common violations that businesses and individuals commit are as follows:

1. Fraudulent Conduct

Fraudulent activity involves any act committed with the intent to deceive another person or the government, usually for some financial benefit. While anyone is susceptible to making a mistake, fraudulent acts are intentional. For example, someone who purposefully falsifies a company’s financial records has committed fraud.

Companies can protect themselves against employee or director fraud by carefully scrutinizing applicants’ backgrounds before hiring them. Businesses can also reduce the likelihood of fraud by instituting and employing a robust system of checks and balances regarding the business’s finances and disclosures.

2. Insider Trading and Tipping

Although related, insider trading and tipping are two distinct practices that federal securities laws prohibit. Each involves using material but confidential information to buy or sell a company’s securities, giving the person possessing the information an unfair advantage over other traders when buying or selling those securities.

When the person possessing that confidential information buys or sells securities, they engage in insider trading. Conversely, they commit tipping when they share their acquired confidential information with another individual who then buys or sells securities themselves based on such information.

For example, suppose that a private real estate business that issues securities expects a downturn in the value of its shares. If an employee with stock sells those securities because of that information, they’ll have committed insider trading. And they’d commit tipping if they share the information with someone who sells their company shares.

Companies can reduce the likelihood of these practices by adopting and enforcing blackout policies. These policies prevent employees or directors with access to confidential information from buying or selling stock for a specific time after gaining access to such information. Confidentiality policies can reinforce the importance of not sharing non-public information with others outside the company. 

3. Sarbanes-Oxley Act Violations

The Sarbanes-Oxley Act of 2002 aims to ensure that investors have accurate financial information about companies before investing in them. Publicizing reports with false information or failing to certify public disclosures as accurate are common ways that individuals and businesses violate this important securities law.

The SEC can punish both unintentional and intentional Sarbanes-Oxley violations. As a result, companies must have and follow systems that review financial disclosures for accuracy before they are made public. 

What a California Securities Law Attorney Can Do for You

Avoiding securities law violations is more effective than responding to SEC allegations once a violation has occurred. With experienced and personalized counsel from Alves Radcliffe, you can take proactive measures to protect your business, employees, and reputation from the damage that SEC violations can cause.

Do not wait for an SEC violation to occur before taking action. Contact Alves Radcliffe today and schedule a consultation to discuss your situation.

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.