Securities Litigation

What Is Securities and Investment Fraud Litigation?

A securities or investment fraud lawsuit alleges that a company or brokerage firm did not follow rules established by the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) or other federal and state laws when soliciting or managing investments. While investment fraud arises in a number of contexts, the most common situations in these types of litigation include:

• Breach of fiduciary duty owed to investors
• Broker fraud (unsuitable investment recommendations)
• Investment fraud (Ponzi schemes)
• Misrepresentation of material facts in offering documents
• Misrepresentation of financial results (financial statement fraud)
• Accounting malpractice
• Market manipulation
• Insider trading
• Unauthorized stock trading

For a more complete discussion of common securities litigation issues please see our pages on:

• Securities Class Actions and the PSLRA
• Securities Arbitration
• Private Placements (Regulation D Offerings)
• Hedge Funds
• Structured Investment Products
• Venture Capital Investing and JOBS Act
• SEC Whistleblower Cases

Our securities lawyers have had notable success in class actions and individual cases involving sophisticated scams, many perpetrated with the help of accounting and auditing professionals. If your claim arises from an investment account maintained at a brokerage firm, you may be required to arbitrate your claim with a FINRA appointed arbitration panel. Pearson Warshaw attorneys have years of experience representing investors in securities arbitration and can advise you if you suspect misconduct by your broker. We also have the ability to analyze complex securities transactions, such as Rule 144 restrictive stock sales, PIPE transactions and venture capital investments, as well as violations of SEC regulations, working closely with federal investigators.

‘Individual Shareholder Suits

PSW also represents the interests of minority shareholders who are forced out by “cram down” or other stock manipulations. Our lawyers have recovered damages for victims of hostile takeovers by demonstrating how our clients’ shares were intentionally devalued, forcing liquidation.

Securities Litigation News

The North American Securities Administrators Association (NASAA) on August 28, 2012, identified the top ten investor traps to look out for in the coming year. To review these threats, click here.

On May 18, 2012, the Financial Industry Regulatory Authority (FINRA) announced further guidance on its new rules concerning Know Your Customer and Suitability of Investment Recommendations. FINRA Rules 2111 and 2090 are modeled after former NASD Rule 2310 (Suitability) and former NYSE Rule 405(1) (Know Your Customer). To read more about the new FINRA Suitability Rules, click here.

Morningstar Must Answer Complaint by Receiver for Failed Hedge Fund – A federal district judge in the Eastern District of Pennsylvania denied on August 24, 2012, Morningstar’s motion to dismiss a complaint brought by a receiver of a failed hedge fund. Although the Court issued only a one line order denying the motion, the complaint raises interesting questions as to a rating agency’s liability. The receiver, appointed after the SEC shut down Robert Stinson, Jr.’s STABL Mortgage Fund in 2010, alleges that Morningstar issued a five star rating to the STABL Fund in reckless disregard of numerous red flags. The complaint alleges claims for contribution for violations of Rule 10b-5 and aiding and abetting fraud and breach of fiduciary duty. The case is Schwartzman v. Morningstar, Case No. 2:12-cv-01647-BMS (E.D. PA).