The area of law that deals with shares of stock, debentures and bonds that are issued by corporations and governments to evidence ownership is known as Securities Law. Securities use the profits or assets of a corporation as a form of payment that will result in dividends or pay-offs for investors, but the ultimate viability of a security depends on the corporation's profitability. With the passage of the Securities Exchange Act of 1934, provisions are now in place to ensure that the entire process of securities trading is safely regulated in our country.
Securities litigation can arise when questionable practices such as illegal fund trading schemes are used. The Securities Exchange Act specifically addressed these problems by requiring issuers to "file various reports with SEC in order to provide the public with adequate information about companies with publicly traded stock." The Act also gave shareholders the right to bring a private action in federal court to recover damages they have sustained as a result of securities fraud.
If you own a business or are involved with handling the issuing of securities, you may be subject to private civil litigation for a securities dispute at some point in your career. These matters are not always involved with the trading of securities, but can also include private transactions, allegations of insider trading and accounting issues. One of the best ways to avoid litigation is by ensuring that disclosures about the risks associated with your securities are accurate and complete. With the financial crisis taking its toll on America, more and more shareholders are looking to seek monetary gain by filing securities litigation.
Some of the most common charges filed include failure to allege fraud with particularity, failure to allege materiality and failure to allege loss causation. Once again, disclosing the complete risks that are associated with a security and accompanying that with the appropriate cautionary language is the best way to avoid securities litigation in today's business world.