Practice Area

Securities laws exist to protect investors from unscrupulous characters. If you rely on false promises, false information, or concealed information that induced you to make an investment, you might have a securities claim to recoup your losses.

If you relied on erroneous investment advice, bought stock in a company engaged in criminal or outrageous business practices, or are a minority shareholder facing unfair actions by majority shareholders, call our experienced attorneys at the Jacobs Law Group. We have unique experience in securities litigation in Philadelphia

Applying the Howey Test

The Securities Act of 1933 and the Securities Exchange Act of 1934 (Exchange Act) are groundbreaking laws to protect investors and guide issuers in how they offer investments. Securities must be disclosed and are subject to Securities and Exchange Commission (SEC) registration requirements. If an investment contract exists under the Howey Test, it qualifies as a security.

In 1946, the U.S. Supreme Court in SEC v. W.J. Howey Co. ruled that an investment contract exists if a monetary investment in a common enterprise is made because the investor expects to profit from others’ efforts to make the enterprise a success. Today, some cryptocurrencies have qualified as investment contracts, giving investors some leverage if securities litigation is necessary. If an investment turns out to be fraudulent, our dedicated lawyers are experienced in securities litigation in Philadelphia and could provide guidance.

Elements to be Proved in a Securities Fraud Claim

The Exchange Act includes Rule 10b-5, which spells out how someone defrauds another in the sale of securities. Violations could include management using ‘creative accounting’ to muddy losses, insider trading, lies meant to drive up the company’s stock price, and offers to majority shareholders for a better return if they help perpetuate the deception. In 2000, the SEC issued Rule10b5-1 and Rule10b5-2 to remain current on securities fraud issues.

Plaintiffs in securities fraud complaints can engage in civil litigation based on a 10b-5 claim. They must prove that:

  • They relied on a misrepresentation of a company in the decision to invest in securities.
  • The misrepresentation or omission was material.
  • The person encouraging the purchase of securities knew that the statements made were misrepresentations or that material information was not disclosed.
  • The investor lost money.
  • The investor’s loss was directly related to the misrepresentation or omission.

In 1995, the Courts made it more difficult to file securities lawsuits, as they believed too many frivolous claims were being brought. The Private Securities Litigation Reform Act (PSLRA) imposed strict pleading requirements, which some attorneys tried to circumvent by filing lawsuits in state court. The Securities Litigation Uniform Standards Act (SLUSA) of 1998 named the federal court the exclusive forum for class actions involving most securities fraud cases. Because complex rules govern securities litigation, it is best to consult a skilled local attorney at our Philadelphia office.

Direct or Derivative Securities Litigation in Philadelphia

Shareholders in U.S. corporations can bring two types of lawsuits: direct or derivative. A direct lawsuit could be filed if a shareholder is directly harmed—for instance, a minority shareholder squeezed out of the company with his/her shares redeemed at a price less than the market value of his/her shares could bring a direct shareholder suit for damages. Any damage award would belong to the plaintiff.

A derivative lawsuit asserts that the defendants harmed the company, causing the stock price to decline. The plaintiffs would be representing the company, and any damages award would be returned to the company. The procedural process is different for derivative and direct cases, as a knowledgeable attorney at our firm could explain.

Contact Our Attorneys for Guidance in Philadelphia Securities Cases

Shareholders are protected under federal law from fraud due to a broker’s or company representative’s misrepresentations. If you are in this situation, you will want justice and reimbursement after relying on an authority when you handed over money for securities.

Whether you dealt with an unscrupulous broker, invested on the representations of a company’s management, or the Company or others concealed important information when you decided to invest, you may have a case to recoup your money. Our dedicated legal team handles securities litigation in Philadelphia, so call us today for assistance.

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