Bankruptcy

Q. If the entity that issued the securities has filed a bankruptcy petition, can an investor still obtain a recovery?
A. Yes. Those who sold the securities may be held accountable. Additionally, those who “aided” the selling effort may be responsible for losses that have been sustained. However, more stringent standards may be applied when allegations are directed at an “aider.”

Half Truths

Q. Can an investor obtain a recovery if the seller merely failed to mention certain information?
A. Yes. A material omission can cause a representation to be just as misleading as a statement that constitutes an outright falsity.

Intent to Defraud

Q. Can an investor successfully assert a securities law claim even if the seller did not maintain an intent to defraud?
A. Yes. Generally speaking, state securities laws do not require proof of an intent to defraud. In that sense, they are much broader than federal securities law standards.

Time Constraints

Q. Are investors required to file a pleading within a certain period of time?
A. Yes. Statutes of limitations are applicable to court proceedings. As for FINRA arbitration cases, the so-called “six-year rule” is applied.

Unfortunately, these time limitations may not always be applied in a consistent and uniform manner. Consequently, it is usually best to quickly move forward.

Chris Bebel

The Today Show

(Former SEC Attorney)