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Securities and Exchange Commission Lawyers

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author

Securities lawyers represent investors whose brokers or investment advisers have violated securities laws. Investors who purchase securities – such as stocks, bonds, variable annuities, REITs, and mutual funds, may suffer losses due to misconduct by their broker. In many cases of securities fraud, investment products feature too much risk for the client’s individual needs while offering financial incentives for the investment professional.

When Should I Contact a Securities Lawyer?

Securities laws are meant to discourage investment professional misconduct. Still, securities fraud is one of the major problems facing the securities industry. Investors should review their portfolios to ensure they have not suffered unnecessary losses and that their investments are not over-concentrated in any asset or sector.

You may want a securities attorney in the event that your financial professional did not uphold their fiduciary duty or Regulation Best Interest.

  • As a fiduciary, a Registered Investment Adviser must work in your best interest. This means that they cannot recommend investments that put their financial interests ahead of your own.
  • If an investment professional is exclusively registered as a broker, they are not fiduciaries, but they must uphold Regulation Best Interest. The differences between Regulation Best Interest and fiduciary duties are subtle – both requirements prohibit financial professionals from recommending overly risky investments. Regulation Best Interest also requires brokerage firms to disclose any conflicts of interest, as well as whether any of the firm’s representatives have histories of misconduct.

Compliance with the Securities and Exchange Commission Rules

Registered Investment Advisers (RIAs) are required to follow securities rules and regulations set forth by the SEC. Keep in mind that many financial professionals have dual registration as brokers, in which case they must also comply with the Financial Industry Regulatory Authority (FINRA) rules and regulations.

Not sure if your financial professional is a broker or an investment adviser? Look up their Central Registration Depository (CRD) number on BrokerCheck. If they are solely registered as an RIA, their profile will only appear on the Investment Adviser Public Disclosure site, a public database maintained by the SEC. Brokers and dually registered financial professionals will also appear on FINRA BrokerCheck.

If you worked with a broker who recommended investments that were overly risky or that you did not understand, you may be able to recover investment losses.

What is the Purpose of SEC Rules and Regulations?

Securities laws are meant to increase transparency between securities offerors and investors. The SEC requires companies offering securities to file a prospectus. The prospectus discloses information about the business model, the financials, and the company’s management. Investors can access prospectuses on the EDGAR database.

Certain companies may qualify for exemptions from registration. For instance, companies offering securities under Regulation D do not have to register with the SEC because they agree to limit the scope of their securities offering.

The more information that investors can access, the more easily they can assess the risk associated with a particular investment. Investors who rely on their financial professionals for recommendations should be able to trust that these professionals will appropriately assess any of the risks of any investments they recommend, and clearly communicate those risks to investors. 

Securities Law Enforcement

Modern U.S. securities regulations stem from The Securities Act of 1933 and The Securities Exchange Act of 1934. State securities laws, also known as Blue Sky Laws, typically use The Securities Act of 1933 as a framework.

The Securities Act of 1933

Congress signed this Act into law following the Wall Street Crash of 1929. The Act sought to increase transparency in the securities industry and to regain the trust of the American public by explicitly prohibiting fraud and deception in the sale of securities. This law is still frequently cited in investment fraud cases and is also known as the “Truth in Securities Act” or simply the “Securities Act.” To comply with this law, companies that wish to sell stocks, also known as “offerors,” must register with the Securities and Exchange Commission unless they qualify for an exemption.

The Securities Exchange Act of 1934

Congress adopted the Securities Exchange Act in 1934 to create the Securities and Exchange Commission. The SEC oversees securities transactions that take place between investment advisers and investors, while the Financial Industry Regulatory Authority, established in 2007, regulates transactions between investors and brokers.  This Securities Act of 1934 also took aim at manipulation in the securities industry by requiring businesses to disclose certain information about their financials and business management.

New SEC Rules and Regulations

The Securities Act of 1934 charges the SEC with making new rules and regulations that reflect investor concerns and changes to the securities market.

  • Investors have probably seen headlines regarding the SEC lawyers’ ongoing legal battles with various cryptocurrencies. The regulator and various cryptocurrency exchange platforms have locked horns regarding whether crypto coins should count as securities rather than currency. The SEC has published a list of facts investors should know about Initial Coin Offerings.

 

  • In March of 2024, the SEC adopted rules designed to “enhance and standardize climate-related disclosures.” The final rules require the registrant to disclose “Climate-related risks that have had or are reasonably likely to have a material impact on the registrant’s business strategy, results of operations, or financial condition.”

 

  • The SEC also announced in 2024 that Special Purpose Acquisition Companies (SPACs) would be required to make enhanced disclosures regarding conflicts of interest and SPAC sponsor compensation.

SEC Compliance

The Securities and Exchange Commission regularly publishes press releases on its enforcement actions that may be relevant to the investing public, as well as other information that might help investors avoid unnecessary investing losses. For instance, the SEC publishes lists of unregistered soliciting entities and impersonators of genuine firms.

The SEC announced that in 2023 the commission filed “784 enforcement actions and distributed nearly $1 billion to harmed investors.”

Types of SEC Enforcement Actions

The SEC goes after investment advisory firms and investment advisors for securities fraud. The following are some of the most common:

Insider Trading

Illegal insider trading takes place when members of an organization – such as CEOs or board members – make investing decisions based on non-public information.

In March 2023, the SEC announced insider trading charges against the founder and Chief Architect of Silicon Valley company Arista Networks. He allegedly misappropriated information regarding an upcoming acquisition of another company. This announcement led to a stock price increase of 35.1% and a six-figure profit for the founder’s relative. The founder agreed to pay a civil penalty of $1 million.

Offer of Unregistered Securities

Cryptocurrency lender Genesis agreed to pay $21 million to settle SEC allegations that it failed to register securities offered through its crypto asset lending program called “Gemini Earn.” Speaking about this case, one former SEC attorney stated, “The SEC has been trying to stake out its ground as the regulator for crypto.”

Ponzi Schemes

The SEC alleged that Crypto FX functioned as a $300 million Ponzi scheme that targeted 40,000 Latino investors. The SEC alleged that the scheme promised investors “life-altering wealth” from “risk-free” and “guaranteed” crypto and foreign exchange investments. The fraudsters allegedly used the funds generated from duped investors to fund their own lavish lifestyles.

Pyramid Scheme

According to allegations from 2022, the SEC alleged that Forcount Trader Systems functioned as a crypto investment fraud that raised more than $8.4 million from hundreds of retail investors. It also featured a “referral program” that the SEC identified as a pyramid scheme. The referral program came with incentives to recruit new participants, which is the hallmark of a pyramid scheme.

Recordkeeping Failures

In 2018, Aegis Capital Corporation consented to SEC allegations that it failed to file Suspicious Activity Reports (SARs). Brokerage firms file these reports in keeping with the Bank Secrecy Act, which requires financial institutions to file SARs to more easily detect illegal activity like money laundering.

Misleading Investors

The SEC settled with two investment advisory firms for $400,000 following allegations that the firms made misleading statements about their use of artificial intelligence. The SEC chair alleged that the firms were using the buzz-worthy nature of AI to attract investors.

Breach of Fiduciary Duty

According to SEC charges from 2023, investment advisory firm Classic Asset Management breached its fiduciary duty in connection with its use of leveraged Exchange-Traded Funds (ETFs). These high-risk investment products were designed to be held for no more than a day, and yet the advisory firm invested clients in these securities for extended periods of time. The SEC alleged that the firm “lacked a reasonable belief that the leveraged ETFs were in their clients’ best interests.”

Securities and Exchange Commission Lawyers

Securities attorneys are not to be confused with Securities and Exchange Commission lawyers, who represent the Securities and Exchange Commission. Securities and Exchange Commission lawyers have made headlines as of late due to fights with cryptocurrency trading platforms alleging that SEC attorneys have sent out a flurry of Wells Notices to cryptocurrency firms. Wells notices serve to inform firms of SEC investigations. Crypto firms allege these Wells Notices constitute an overstep of the agency’s authority.

Securities Attorney Near Me

Kurta Law Firm is a national securities law firm with headquarters in New York City. Kurta Law securities attorneys specialize in state-specific securities laws in all 50 states.  Our attorneys work with clients all over the country as well as overseas. We travel to our clients’ hearings or arrange to have hearings take place over a video conference call.

Contact Kurta Law Today

If you believe you need a securities attorney, contact Kurta Law for a free case evaluation. You have a limited time to file a claim, so do not hesitate to speak with one of our experienced New York securities lawyers. Securities attorneys are experts in FINRA arbitration and other niche areas of securities rules and regulations. Contact us today for more information: (877) 600-0098 or info@kurtalawfirm.com.

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.