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7 Laws, Rules and Regulations That Protect Investors in the United States

May 10, 2023 Blog

As an investor in the United States, you have clear legal rights. There are several laws, rules and regulations that protect you, and you can use these protections to pursue a claim for damages when you suffer fraudulent investment losses.

Different laws, rules and regulations apply in different circumstances, and as an investor, it isn’t always (or even often) easy to determine which protections apply in a particular scenario. With this in mind, while this list is intended as a resource for investors, there is no substitute for speaking with a lawyer about your legal rights.

The Laws, Rules and Regulations That Protect U.S. Investors

What are your legal rights as an investor in the United States? Here are seven examples of the laws, rules and regulations that protect you:

1. Securities Act of 1933

The Securities Act of 1933 is one of the first and most important laws that Congress enacted to protect investors from fraud. As the U.S. Securities and Exchange Commission (SEC) explains, the Securities Act of 1933 serves two primary purposes:

  • It “require[s] that investors receive financial and other significant information concerning securities being offered for public sale;” and,
  • It “prohibit[s] deceit, misrepresentations, and other fraud in the sale of securities.”

If you suffer investment losses due to the nondisclosure of material information, if you receive inaccurate information about a security, or if you fall victim to any other form of investment fraud, you may have a claim under the Securities Act of 1933. This law is extremely broad, and it protects investors under an extremely wide range of scenarios.

2. Securities Exchange Act of 1934

The Securities Exchange Act of 1934 established the SEC and imposed additional restrictions on the dissemination of false, misleading and incomplete information in the securities market and to prospective investors. It broadly prohibits fraud “of any kind in connection with the offer, purchase, or sale of securities.” Under the Securities Exchange Act of 1934, companies must register (or qualify for an exemption) before offering securities to the public, and if they fail to do so, they can be held legally accountable.

3. Investment Company Act of 1940

The Investment Company Act of 1940 “regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to [investors].” As the SEC goes on to explain, “[t]he focus of this Act is on disclosure to the investing public.”

4. Investment Advisers Act of 1940

While the Investment Company Act of 1940 focuses on mutual funds and other entities involved in investing and trading in securities, the Investment Advisers Act of 1940 focuses on those that help retail investors decide where to put their money. As amended, the Investment Advisers Act of 1940 requires investment advisory firms to register if they have at least $100 million in assets under management.

Along with requiring registration, the Investment Advisers Act of 1940 establishes various other requirements (and prohibitions) as well. Along with the Securities Act of 1933, Securities Exchange Act of 1934, the SEC’s Regulations and FINRA’s Rules, it serves as a key source of protection against investment fraud for retail investors in the United States.

5. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established new and enhanced protections for retail investors in the areas of the regulation of financial products and corporate disclosure. With the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress sought to update the nation’s federal securities laws to better reflect the risks in the modern securities markets.

6. U.S. Securities and Exchange Commission (SEC) Regulations

Pursuant to its authority under the Securities Exchange Act of 1934, the SEC has adopted an extensive body of regulations that are designed to enhance investor protections in the United States. While there are numerous SEC regulations, perhaps the most well-known is SEC Rule 10b-5, which the Commission uses to investigate and prosecute cases of insider trading.

The SEC’s regulations address virtually all aspects of publicly-traded companies’ and investment firms’ conduct in one way or another. They play a crucial role in protecting investors’ interests in the United States, and when pursuing claims for investment fraud, it is imperative that investors’ lawyers have a clear understanding of the regulations that apply.

7. Financial Industry Regulatory Authority (FINRA) Rules

The Financial Industry Regulatory Authority (FINRA) works alongside the SEC to regulate the U.S. securities markets. Specifically, FINRA focuses its efforts on regulating brokerage firms and individual brokers. Firms and brokers must register with FINRA, and, as a condition of registration, they must agree to submit to FINRA arbitration for the resolution of all claims filed by their customers.

Along with registering and submitting to arbitration for the resolution of customer claims, FINRA’s Rules establish numerous other requirements for brokerage firms and brokers in the United States. When brokerage firms and brokers violate these rules—whether negligently or intentionally—investors who suffer resulting losses can file claims to hold them accountable.

One of the most important FINRA Rules is Rule 2111. This rule establishes the requirement for brokers to provide “suitable” investment recommendations. Under Rule 211, brokers must have “a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through . . . reasonable diligence.” Lack of suitability is among the most common grounds for investor claims in FINRA arbitration.

Discuss Your Legal Rights with a Lawyer at Zamansky LLC

At Zamansky LLC, we help investors throughout the United States assert their legal rights when they fall victim to fraud. If you believe that you may be a victim, we encourage you to contact us promptly for more information. To speak with a lawyer at Zamansky LLC in confidence as soon as possible, please call 212-742-1414 or request an appointment online today.

Client Reviews

“Jake Zamasky and his colleagues represented me in a FINRA arbitration case against a large multinational bank and succeeded in obtaining an award for the full amount of my investment losses. I would highly recommend the Zamansky firm for their experience in securities litigation, their level of detailed research and case preparation, and their ability to effectively fight for what’s right.”

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“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

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