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Individual Investors: Get to Know the Securities Laws that Protect You

November 15, 2017 Blog

As someone who is saving for retirement, working with a broker or investment advisor, or managing your own online brokerage account, there are laws that protect you. These laws regulate the securities markets in the United States and impose legal standards on the companies and individuals that sell stocks and offer advice to individual investors.

While these laws are complicated, having a basic understanding of the legal protections that are available can help you make informed decisions if you suspect that you may be a victim of investment fraud. An experienced financial fraud lawyer will be able to explain how they apply to your personal circumstances:

1. Securities Act of 1933

The Securities Act of 1933 is one of the primary laws governing the U.S. securities markets. It requires companies to provide prospective investors with complete and accurate information regarding their stocks and other investments, and it prohibits fraud and misrepresentation in connection with the sale of securities. This is also the law that requires publicly-traded securities to be registered with the federal government.

2. Securities Exchange Act of 1934

The Securities Exchange Act of 1934 established the Securities and Exchange Commission (SEC), which now oversees the U.S. investment market and pursues enforcement actions against companies, advisory firms and brokers suspected of financial and investment fraud. This law also establishes additional prohibitions (such as the prohibition against insider trading) designed to protect individual investors who suffer personal losses due to fraudulent conduct.

3. Investment Company Act and Investment Advisers Act of 1940

The Investment Company Act and Investment Advisers Act of 1940 regulate companies and individuals that sell securities and offer investment advice. Under the Investment Company Act of 1940, companies must disclose their financial condition to potential investors. Under the Investment Advisers Act of 1940, advisory firms and individual advisors must register with the SEC and comply with various regulations intended to prevent investor fraud.

4. Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 was a response to widespread corporate fraud which led to billions of dollars in losses for individual investors. The law (commonly known as “SOX”) increased public companies’ disclosure obligations and adopted a number of other measures designed to enhance corporate responsibility and accountability.

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

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 further enhanced public companies’ disclosure obligations, established new standards for credit ratings and implemented various other consumer protections designed to protect individual investors. It also includes whistleblower protections for individuals who report suspected cases of financial and investment fraud.

Are You a Victim of Financial or Investment Fraud?

If you are an individual investor and you suspect that you may be a victim of financial or investment fraud, we encourage you to contact us for a complimentary initial consultation. Our lawyers have decades of experience representing investors nationwide, and we can help you protect your legal rights. To schedule an appointment, please call (646) 663-5628 or send us your contact information online today.