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Securities Law Breena Meng. Securities Law -- Breena Meng 2 Introduction Enron, WorldCom, Quest, Parmalat, Martha Stewartsecurities litigation has been.

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Presentation on theme: "Securities Law Breena Meng. Securities Law -- Breena Meng 2 Introduction Enron, WorldCom, Quest, Parmalat, Martha Stewartsecurities litigation has been."— Presentation transcript:

1 Securities Law Breena Meng

2 Securities Law -- Breena Meng 2 Introduction Enron, WorldCom, Quest, Parmalat, Martha Stewartsecurities litigation has been at the forefront of American consciousness (and often the leading news story) for the past two years. At a time when more Americans than ever before have had access to investment opportunities, the future of securities law finds itself at a cross-road. Gone are the heady dot-com days in which people eagerly checked the stock market every morning, if only to view their overnight double-digit gains. Now, the securities industry has been rocked by waves of scandal, some so infamous that the company name has a place of dubious honor on the Securities and Exchange Commissions homepage (look for Enron on thehomepage lower left hand corner of the screen). Securities scandals have left many investors feeling misled and betrayed, and the number of potential plaintiffs increases everyday. For the seasoned securities lawyer, this presents a large yet manageable workload. For the new securities lawyer, it can be a daunting nightmare. Because the scope of securities law is extremely large, this presentation has been tailored to provide a guide to plaintiffs council. This presentation is not intended to be exhaustive; however, it is intended to give the new securities lawyer an easy to read resource and starting point.

3 Securities Law -- Breena Meng 3 Important Note The primary basis for claims will either be a federal statutory violation or a common law claim. Although many states have blue sky laws (state securities laws) which closely follow federal statues and allow a private right of action, some states do not allow their citizens a private right of action against securities brokers/firms. It is imperative that every securities lawyer check their particular jurisdiction before filing a claim to ensure that the claim and case theory are both valid. Therefore, a prudent securities lawyer could utilize the following research strategy: 1. Evaluate the applicable state statutes 2. Evaluate the applicable federal statutes 3. Decide on a common law or federal claim 4. For background reading, consult a looseleaf service or legal encyclopedia 5. Search the federal and state agency websites for other regulations (for a listing of all state agency sites, please refer to the Government Websites section on the Internet slide) 6. Find applicable case law (ideally) within your jurisdiction 7. Research broker obligations by utilizing industry websites 8. Create a strategic case theory

4 Securities Law -- Breena Meng 4 Securities Acronyms…Learning the Language ADRAmerican Depository Receipt AMEXAmerican Stock Exchange BoardFederal Reserve Board DowDow Jones Industrial FRBFederal Reserve Board Fedchair of the Federal Reserve Board IPOinitial public offering MIDAS--Market Information Data Access System NYSENew York Stock Exchange OTCover-the counter securities PSLRAthe Private Securities Litigation Reform Act of 1995 SECSecurities and Exchange Commission

5 Securities Law -- Breena Meng 5 Commonly Used Securities Terms AftermarketTrading a security immediately following its initial offering to the public. Ask priceThe price at which the firm will sell a share of its stock. Bear marketA market in which securities prices are low or declining. Bid/ask spreadThe difference between the price a seller will pay (bid price) and the price the firm will sell (ask price) a stock. The difference (spread) increases or decreases according to the supply and demand for the stock offered. Bid price (also called buy price)The price at which the seller will buy a share of stock. Bull marketA market in which securities prices are high or rising. Commoditya generic, largely unprocessed good. Commodities are frequently grains, livestock, or metals. DividendPayment of cash or stock given to shareholders at the direction of the board of directors. Market orderAn order to buy or sell a stock at the best possible price at the time the order was received. Out-of-pocket loss--The difference between the value of what the purchaser parted with, and the value of what he or she has received. Secondary offering (also called secondary distribution)An offering of a stock that has already been issued to the public. The stock may have been held by large investors or institutions. Proceeds from the sale go to these holders. Securityevidence of a debt or property ownership

6 Practice Materials What are they? Practice materials are resources for practicing attorneys. Often these materials are written by an expert in the particular field of law. The aim of practice materials is to give practitioners a real life view of the law.

7 Securities Law -- Breena Meng 7 Looseleaf Services Securities Litigation: Damages. Michael J. Kaufman. West GroupKF K38 v. 26 Volume 26 Chapter 1Overview Chapter 2Regulation of Limited Liability Companies under the Federal Securities Laws Chapter 3The Private Securities Litigation Reform Act of 1995 Chapter 4Empirical Analysis of Class Action Securities Litigation under the Private Securities Litigation Reform Act Chapter 5The Scope of Federal Securities Regulation Chapter 5AThe Sarbanes-Oxley Act of 2002 Chapter 5BThe Sarbanes-Oxley Acts unnoticed enhancement of private civil liability under the Securities Law Chapter 6Section 11, Securities Act of 1933 Chapter 7Damages for Violations of Section 12, Securities Act of 1933 Chapter 8Sections 9(c), 16(b), and 18 Damages Chapter 9Nature of Implied Remedies Chapter 10Rule 10b-5 Chapter 11Loss Causation in Rule 10b-5 Cases Chapter 12Statutory Guidance for Rule 10b-5 Damages

8 Securities Law -- Breena Meng 8 Federal Materials American Jurisprudence Trials: Broker-Dealer Fraud: Churning, 36 Am. Jur. Trials 1. Stockbroker Liability Litigation, 88 Am. Jur. Trials 1 American Jurisprudence Proof of Facts: Legal Malpractice In A Securities Offering, 22 Am. Jur. POF 3d 559. Participation By Corporate Participation By Corporate Officer In Illegal Issuance of Securities, 9 Am. Jur. POF 2d 577. Proof of A Security Under Federal and State Statutes, 22 Am. Jur. POF 3d 485. Proof of Unsuitable and Unsuitable and Unauthorized Trading by Securities Brokers, 28 Am. Jur. POF 3d 87.

9 Securities Law -- Breena Meng 9 Federal…continued Am. Jur. Pleadings and Practice: 22 Am Jur Pl & Pr Forms, Securities RegulationComplaint in federal court Action based on violation of Securities and Exchange ActAllegationsClaim for declaratory reliefValidity of contract, § 13, Volume 22, KF A45 v , Am Jur Pl & Pr Forms, Securities RegulationComplaint in federal court By client against brokerage firm and brokerFraudulent mismanagement of short and margin accounts, § 27, Volume 22A, KF A45 v , Am Jur Pl & Pr Forms, Securities RegulationComplaint in federal court By stockholdersFor accounting and Damages for insider trading, § 51, Volume 22A, KF A45 v. 22A 2001, Causes of Action: Securities Fraud Under § 10(b) of the 1934 Securities Exchange Act and/or Rule 10b-5 Expert proof, 9 COA 2d 271 § 73 Misrepresentation or omission, 9 COA 2d 271 §§ 5, 16-18, 31 Statute of Limitations, 9 COA 2d 271 § 38

10 Securities Law -- Breena Meng 10 Federal…continued Moores Federal Practice KF8840.M633 Securities Laws Discovery in securities actions, scope of…26.46[14] Pleading requirements under Private Securities Litigation Reform Act for alleging securities fraud…8.04[8][b]; 9.03[6][a]; 9.10[1] Rule 11 Sanctions under PSLRA…11.29 Wrights Federal Practice and Procedure KF8840.W68 Securities Discovery, relevancy of material sought, Civ § 2009 Limitation of actions, federal common law, Juris § 4519 Sales, fraud, pleading, Civ § 1297

11 Securities Law -- Breena Meng 11 Federal…continued Applicable Forms Examples of forms required by the Securities and Exchange Commission: Insiders (Officers, Directors & Significant Shareholders) Proxy Statements & Tender Offer and Acquisition Statements Investment Adviser Forms Broker-Dealer Registration & Reporting SROs, Exchanges & Alternate Trading Systems

12 Securities Law -- Breena Meng 12 State Materials Wests Colorado Law Finder Securities Investor protection U.S.C.A. 15 § 78aaa et seq. Secured Transactions C.J.S. Secured Transactions § 1 et seq. Whistleblowers U.S.C.A. 18 § 1514A Wests Colorado Practice Series Part I. Business Organizations § 1.41 Issuance of Stock Securities Law Requirements § 3.61 Securities Considerations

13 Securities Law -- Breena Meng 13 State…continued Colorado Law Annotated: Securities § Liability for Misrepresentations and Omissions by Seller of Securities Under the Colorado Securities Act A. Statutory Scheme B. Definition of a SecurityGenerally, investment contracts C. Elements of claimGenerally D. Elements of claimState of mind E. Elements of claimMateriality F. Statute of Limitations G. Arbitration H. Attorney fees I. Claims under Securities Act in federal court J. Collateral references Applicable Forms: Please see previous reference to the required SEC forms, Colorado forms, and Am Jur Pleading and Practice. American Jurisprudence Legal Forms, KF170.A542 Form Drafting Checklist: Am Jur Practice Guide, KF170.F67

14 Securities Law -- Breena Meng 14 Other Materials Jury Instructions: Colo. Jury Instr., Civil 9:1 (4 th ed.) (negligencegeneral concepts) Colo. Jury Instr., Civil 19:2 (4 th ed.) (nondisclosure or concealmentelements of liability) Colo. Jury Instr., Civil 19:4 (4 th ed.) (material factdefined) Colo. Jury Instr., Civil 19:5 (4 th ed.) (nondisclosureduty to disclose) Self Help Books: Federal Securities Laws: Selected Statutes, Rules and Forms, 2004 Edition by John C. Coffee Jr. and Joel Seligman, ISBN Securities Offerings, magazine subscription, ASINB00006KWK3 United States Securities Law: A Practical Guide by James M. Bartos, ISBN

15 Conclusion Securities litigation is a complex, rapidly changing, and engaging field of law. Although securities law is a broad term encompassing many concepts, it is important to narrow the scope of the search to the particular legal question before you. Utilizing this strategy, securities law research becomes more manageable.

16 The End

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