The Securities and Exchange Commission has earned a reputation as a dogged and tenacious regulator. They have a large staff of highly-qualified attorneys who keep a close eye on the securities markets. Here are some common reasons why they will take enforcement action.
If you are selling something that meets the legal definition of the term “securities,” you must register them with the SEC for sale. The legal definition of the term is very broad and encompasses some things that you may not expect. Then, there are many regulations that you must follow. The SEC aggressively takes action when someone has sold unregistered security, and the seller could also be liable in a civil lawsuit.
One cannot transact in securities if they are in possession of material nonpublic information. The restrictions apply to both buying and selling securities. The SEC can take civil action against those who have engaged in insider trading. One can also be prosecuted criminally for insider trading.
Securities laws have very strong provisions against fraudulent practices in connection with the sale of securities. The SEC has a general anti-fraud enforcement power that they can use as the basis of actions. Rule 10b-5 is what prohibits securities fraud. However, there is a requirement of scienter, which is the legal term for intent in SEC rules. If the SEC brings an anti-fraud action, they can levy a monetary penalty and disgorge any proceeds of the fraudulent transaction.
It often takes an experienced attorney to keep businesses on the good side of securities law, because the statutes and the attached regulations are complex. Call the Primum Law Group at 415.293.8042 or contact us online to discuss your business and get legal advice.