Securities Litigation for Investors in California and Florida

Investors who lose money because of false statements or concealed facts have claims under the federal securities laws and under California and Florida law. Those claims can reach the issuer and, often, the people who sold, signed off on or helped carry out the offering. Reiser Law, P.C. represents investors and court-appointed receivers in securities and investment fraud litigation in state and federal courts and in arbitration, from offices in Walnut Creek and Miami.

Federal securities claims

Three federal claims do most of the work in investor cases. Section 11 of the Securities Act makes the issuer, its directors and signing officers, its underwriters, and accountants and other experts who certified part of a registration statement liable to purchasers when the registration statement contains a material misstatement or omission. 15 U.S.C. § 77k(a). Section 12(a)(2) makes a person who offers or sells a security by means of a prospectus or oral communication containing a material misstatement or omission liable to the purchaser for the price paid or for damages. 15 U.S.C. § 77l(a)(2).

The broadest federal claim arises under Section 10(b) of the Exchange Act and Rule 10b-5, which prohibit fraud in connection with the purchase or sale of any security. 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. A Rule 10b-5 claim requires proof of scienter, which courts define as an intent to deceive, manipulate or defraud, or in most circuits a high degree of recklessness. The claim must be filed within two years after discovery of the facts constituting the violation and no more than five years after the violation. 28 U.S.C. § 1658(b). Anyone who controls a person liable under the Exchange Act is jointly and severally liable with that person unless the controlling person acted in good faith and did not induce the violation. 15 U.S.C. § 78t(a).

The aiding and abetting gap, and how state law fills it

A private plaintiff may not bring an aiding and abetting claim under Section 10(b). Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994). Congress later gave the SEC, but not private investors, the power to pursue those who knowingly or recklessly provide substantial assistance to a violator. 15 U.S.C. § 78t(e). For investors, that makes state law essential when the people who made a fraud possible were banks, auditors, valuation firms or other professionals rather than the promoters themselves.

California and Florida claims

California's Corporate Securities Law makes it unlawful to offer or sell a security in California by means of a communication containing an untrue statement or misleading omission of a material fact. Cal. Corp. Code § 25401. A buyer may sue the seller for rescission or, if the buyer no longer owns the security, for damages. Cal. Corp. Code § 25501. Control persons, principal executive officers, directors, and employees and broker-dealers who materially aid in the violation can be jointly and severally liable with the seller unless they show they had no knowledge of the facts giving rise to liability. Cal. Corp. Code § 25504. Our Bay Area investment fraud page covers these claims in more detail.

Florida's securities statute, chapter 517, lets a purchaser rescind a sale made in violation of its registration requirements, and it makes controlling persons jointly and severally liable unless they prove they acted in good faith and did not induce or cause the violation. Fla. Stat. § 517.211. Our Miami investment fraud page explains how those claims work.

Class, mass and individual actions

Securities cases can be brought for one investor, for a group of investors in a single action, or as a class action. Federal law bars many state-law class actions with more than 50 members that allege misrepresentations in connection with the purchase or sale of a nationally traded or otherwise covered security. 15 U.S.C. § 78bb(f)(1), (f)(5)(B). Whether that bar applies, and whether a group action would serve investors better than a class, are early strategic questions. See our class action page.

Brokers and FINRA arbitration

Claims against a broker or brokerage firm usually go to FINRA arbitration under the customer agreement. We represent investors in those proceedings; see our page on FINRA arbitration.

Our experience

We represented more than 150 investors in a private lending fund that was later revealed to be a Ponzi scheme, in separate lawsuits against the fund's auditor and its valuation firm. Both cases resolved in confidential settlements. We currently represent a court-appointed receiver in claims that a national bank aided and abetted an alleged $119 million Ponzi scheme. Our pages on Ponzi scheme recovery and clawback defense, and our article on suing an auditor after a Ponzi scheme, describe that work. See our representative cases.

Questions clients ask

Can I sue the auditor of a fund that defrauded me?

Possibly. An auditor that certified part of a registration statement can be liable under Section 11. Outside registered offerings, claims against auditors usually arise under state law, including negligent misrepresentation and aiding and abetting fraud.

How long do I have to file?

For a federal Rule 10b-5 claim, two years after discovering the facts and no more than five years after the violation. State-law deadlines differ, and some are shorter. Talk to counsel as soon as you suspect a problem.

Is my investment a security?

Often, yes, even when it was not called one. Interests in funds, promissory notes, and some real estate arrangements can be securities. The answer determines which laws apply and who can be held liable.

Talk to us

For California matters, call (925) 256-0400 or email Michael J. Reiser at michael@reiserlaw.com. For Florida matters, call (305) 726-2003 or email Matthew W. Reiser at matthew@reiserlaw.com; Spanish speakers can write to Isabella Martinez at isabella@reiserlaw.com. You can also use our contact page.

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