Investment Law Center
Investment Laws are closely related to securities laws. There is a long history of securities law in the United States beginning in the early part of the 20th Century.
The Securities Act of 1933
Often called the "truth in securities" law, the Securities Act of 1933 requires that investors receive financial and other significant information related to securities offered for public sale and prohibits deceit, misrepresentation, and fraud in the sale of securities. A primary means of accomplishing these goals is through the registration process. This information provided during registration enables investors to make informed decisions about whether to purchase a particular company's securities. While the Securities and Exchange Commission (SEC) does police the accuracy of these reports it does not guarantee it. However, investors who purchase securities and suffer losses have important recovery rights related to these reports if they can show that the information provided was inaccurate or incomplete.
The registration forms companies must file require: (1) a description of the company's assets and business; (2) a description of the security to be offered for sale; (3) information about the management of the company; and (4) financial statements for the company that have been certified by independent accountants. Registration statements and prospectuses become publicly available shortly after filing with the SEC, and are subject to examination for compliance with disclosure requirements.
Notably, not all securities must be registered with the SEC. Common exemptions include private offerings to a limited number of buyers, offerings of limited size, offerings only to entities within the same state as the company making the offering, government offerings, and several others.
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 empowers the SEC with broad authority over every aspect of the securities industry, including the power to register, regulate, and oversee brokerage firms, transfer agents, clearing agencies, and self regulatory organizations (SROs). The Act also prohibits certain conduct in the markets and provides the SEC with disciplinary powers over regulated entities and persons associated with them. The Act also empowers the SEC to require periodic reporting of information by companies with publicly traded securities as described above.
The Securities Exchange Act also governs the disclosures contained in materials used to solicit shareholders' votes for annual or special meetings. This information, when contained in proxy materials, must be filed with the SEC before the solicitation to ensure compliance with the SEC's disclosure regulations.
Additionally, when one is acquiring more than five percent of a company's security interests, the Securities Exchange Act requires other disclosures.
Insider trading is also prohibited by the Securities Exchange Act. Insider trading is the illegal trading of securities by a person who is in possession of material, nonpublic information.
Sarbanes-Oxley Act of 2002
Sarbanes-Oxley came on the heels of the financial scandals of 3Com and Enron in the late 1990s and early 2000s. The Act required a number of reforms to enhance corporate responsibility, enhance financial disclosures, and prevent the same types of fraud that had led to the aforementioned scandals. It created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession, as well as a number of significantly enhanced reporting requirements and public transparency mandates.
Other examples of important investment laws include the Trust Indenture Act of 1939 (establishing standards for disclosures related to trust indentures), the Investment Company Act of 1940 (regulating the organization of investment companies), the Investment Advisers Act of 1940 (regulating investment advisers), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (creating consumer protection, trading restrictions, credit ratings, regulation of financial products, corporate governance and disclosure, and transparency requirements), and the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) (aims to help businesses raise funds in public capital markets by minimizing regulatory requirements).
For more information about investment laws, please review the materials below. Additionally, should you require legal assistance pertaining to your investment law questions, you can find a list of attorneys in your area under the Law Firms tab on the menu bar above.
Know Your Rights!
Investment Law - US
- ABA - Special Investors and Investment Structure Group
The Special Investors and Investment Structure Group addresses specialized investments in real estate, including pension plan investments, insurance company investments and international investment in real estate. The Group also addresses specialized structures for investment and financing, including limited liability companies, partnerships, REITs, land trusts and real estate investment funds.
- Dodd-Frank Wall Street Reform and Consumer Protection Act
A bill to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.
- Investor Bill of Rights
In many important ways, an investor is not simply a consumer but a party to a legal contract. Both the offeror and purchaser of an investment have rights and responsibilities. This "Bill of Rights" is designed to assist you the investor in making an informed decision before committing your funds. It is not intended to be exhaustive in its descriptions. Should you desire further information about a particular type of investment, you are invited to contact the appropriate organization listed on the back of this brochure.
- Securities Exchange Act
In contrast to the Securities Act, the Exchange Act primarily regulates transactions of securities in the secondary market - that is, sales that take place after a security is initially offered by a company (the issuer). These transactions often take place between parties other than the issuer, such as trades that retail investors execute through brokerage firms. The Exchange Act operates somewhat differently from the Securities Act. To protect investors, Congress crafted a mandatory disclosure process that is designed to force companies to make public information that investors would find pertinent to making investment decision.
- Securities Investor Protection Corporation - General Rules and Regulations
The Securities Investor Protection Corporation either acts as trustee or works with an independent court-appointed trustee in a missing asset case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered. All other so-called "street name" securities are distributed on a pro rata basis.
- United States Securities Act
Often referred to as the "truth in securities" law, the Securities Act of 1933 has two basic objectives: * require that investors receive financial and other significant information concerning securities being offered for public sale; and * prohibit deceit, misrepresentations, and other fraud in the sale of securities.
Various Types of Investments
- Bond Basics - Introduction
The first thing that comes to most people's minds when they think of investing is the stock market. After all, stocks are exciting. The swings in the market are scrutinized in the newspapers and even covered by local evening newscasts. Stories of investors gaining great wealth in the stock market are common. Bonds, on the other hand, don't have the same sex appeal. The lingo seems arcane and confusing to the average person. Plus, bonds are much more boring - especially during raging bull markets, when they seem to offer an insignificant return compared to stocks.
- Forex Trading Investments
Forex trading is the process of trading foreign currencies. Your money is used to make more money and the amount that you can make is dependent on various factors. In forex, or Foreign Exchange, you are investing in the currencies of countries. You can invest in the United States Dollar, the Euro or any other type of currency in the world. One of the many reasons this type of trading is so beneficial is because it is a global marketplace. If the Australian economy slips, there is likely to be another country and currency doing very well that you can profit from
- Introduction to Mutual Fund Investing
Investors have increasingly turned to mutual funds to meet their retirement and other financial goals. With so many options available, how do you choose the right one for you? Mutual funds offer the opportunity for a number of investors, who share a similar investment objective, to pool their money and have it invested and managed by professional investment managers.
- Investing in Stocks with Basic Knowledge of Economics
Stocks represent ownership in companies, and stock markets are the places where stocks are bought and sold. Those places may be made of bricks and mortar, like the New York Stock Exchange, or they may be computer networks, like the Nasdaq. In years past, when someone bought stock in a company, he would receive a physical certificate that proved how many shares he owned. These days, if you buy stock in a company, you don’t get a pretty piece of paper to prove it; you generally get electronic confirmation of the trade.
- Value-Style Investing
Value-style investing focuses on companies that have been ignored or overlooked by the markets. Both value- and growth-oriented investments can be important components of a diversified portfolio.
Common Types of Investment Fraud
- Ponzi Schemes – Frequently Asked Questions
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.
- Prime Bank Guarantee Scams - High Return or “Risk-Free” Investments
They offer you extremely high yields in a relatively short period of time through access to "bank guarantees" which they say they can buy at a discount and sell shortly thereafter at an enormous premium. You are told that institutions like pension funds stand ready to buy "Prime Bank letters of credit" from large banks, with purchases of over $100 million affording the highest return, but because regulatory restrictions prevent the banks from selling directly to institutional investors a middle man is required to handle the transaction at a contractually prearranged profit.
- Pyramid Scheme Alert
In recent decades, pyramid schemes have become an insidious, pervasive and corrupting influence in the marketplace and community, causing financial and social harm on a global scale. Since 1980 a new form of sales and marketing, called multi-level marketing or network marketing, has spread worldwide and spawned an explosion of pyramid sales schemes involving tens of millions of consumers. The line between legal forms of network marketing and fraudulent pyramid programs is a point of controversy, confusion and inquiry in many countries. Pyramid Scheme Alert will provide much needed information to consumers and other interested parties to reduce the number of illegal and de facto pyramid schemes and victims-and to minimize the severity of effects on individuals and communities.
- SEC Center for Complaints and Enforcement Tips
You can file a complaint or provide us with tips on potential securities law violations though the links on this page. We welcome hearing from you because your information may alert us to broker or firm misconduct, an unfair practice in the securities industry that needs to be changed, or the latest fraud.
Organizations Related to Investment Law
- American Association of Individual Investors
From the beginning, AAII has answered the question, "Where can you go to get unbiased facts and effective knowledge about investing?" James Cloonan, Ph.D., founded AAII in 1978 because he firmly believed that individual investors armed with effective investment education materials and a bit of dedication could outperform the popular market averages. Over thirty years later, the 150,000 members of AAII report investment returns that are consistently higher than those of the stock market as a whole.
- Financial Industry Regulatory Authority (FINRA)
The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s mission is to protect America’s investors by making sure the securities industry operates fairly and honestly. All told, FINRA oversees nearly 4,620 brokerage firms, about 165,920 branch offices and approximately 636,340 registered securities representatives.
- International Trade and Investment Law Society
WCL is rapidly becoming the United States’ premier international trade and investment law program. The International Trade and Investment Law Society (ITILS) aims to bring highly renowned practitioners and academics into the WCL environment to share knowledge and ideas and offer students unique and intellectually beneficial opportunities. Not only is ITILS one of the most successful and engaged student groups here at WCL, but its members have gone on to create waves in the trade community here in D.C. and abroad.
- National Futures Association (NFA)
National Futures Association (NFA) is the industrywide, self-regulatory organization for the U.S. futures industry. We strive every day to develop rules, programs and services that safeguard market integrity, protect investors and help our Members meet their regulatory responsibilities.
- Securities Investor Protection Corporation
The Securities Investor Protection Corporation either acts as trustee or works with an independent court-appointed trustee in a missing asset case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered.
- Small Business Administration and Investment Division
The SBIC Program is one of many financial assistance programs available through the U.S. Small Business Administration. The structure of the program is unique in that SBICs are privately owned and managed investment funds, licensed and regulated by SBA, that use their own capital plus funds borrowed with an SBA guarantee to make equity and debt investments in qualifying small businesses.
- United States Securities and Exchange Commission (SEC)
The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more compelling than ever.
Publications Related to Investment Law
- Investment Treaty News
Since 2001, ITN has offered news, analysis and opinions on international investment law and its implications for sustainable development. The service began as a list-serve where information and views were shared among members, before becoming an electronic newsletter produced by a small editorial team. In its present form, ITN combines these functions by serving as a Web-based platform for discussion and debate, as well as providing regular journalistic reporting on developments and trends in international investment law.
- Investor Guide
Launched in 1996, InvestorGuide.com is WebFinance Inc.'s flagship business. The site's mission is to empower individual investors to take control of their finances and investments through the Internet. InvestorGuide.com believes that every investor, regardless of experience, can benefit from a guide designed to help them sort through all of the investing information on the Internet. Sections that benefit everyone equally are those covering online brokers, stock information, and a comprehensive list of publicly traded companies.
Articles Related to Investment Law
- Foreign Inheritance Blocked by U.S. Tax LawsWhen inheriting a foreign estate, the individual needs to understand what laws pertain to the process so his or her inheritance does not face complications with the United States Internal Revenue Service agencies. It is recommended to contact a lawyer before attempting to import the foreign estate funds, assets or property.
- What Is Repatriation Tax for Multi-Nationals?Taxation for multinationals may come through a foreign income tax of United States based corporations for these persons and companies with increases and an entire reform of the tax system. There is over $2 trillion in earnings by these business entities that has not been taxed previously, and these new laws may increase revenue to the entire country.
- Voluntary Disclosure of Foreign Bank AccountsThere are certain procedures necessary through the Internal Revenue Service when the owner of an estate has a foreign bank account called the Reports of Foreign Bank and Financial Accounts or FBAR. If the person with these accounts has not disclosed revenue, interest and income that has been placed in these accounts, he or she could face criminal charges.
- Foreign Investors Face Tax Consequences in the U.S.When an investor from another country is working with the United States, he or she may face consequences with taxation based on what process he or she has followed. There are several ways that lead to negative impact, and this could include a failure to report income for investments outside the country when the foreign citizen resides in the United States.
- False Claims Act Issues Involving Avoiding Customs ChargesThe False Claims Act is involved in several deals that involve the avoidance of Customs charges and attempting to bypass monetary payments and fees when filling in entry forms with the United States Customs and Border Protection agencies. When this occurs, severe penalties and fees may be issued against the company or organization involved.
- Applying Chinese Law in American CourtsAccounting for foreign laws is important for diplomats and citizens from other countries. Their actions may be subject to certain stipulations that are not considered in the United States even when they are prosecuted or remanded to the American court system.
- Information for International Investors Doing Business in the United States: Consumer ProtectionInvestments, business and foreign involvement has been cooperative in the past so that every party included is able to maximize profits. The absence of most restrictions that may be placed by other countries shows this to be the case, and any needed information is usually provided for these investment matters.
- Amendments to the Foreign Investment Regulations in ChinaAmendments to regulations are constantly occurring, but in China this affects the foreign investments for the country and those associated with investors. The amendment changed each investment from a case-by-case basis to a more open policy where only certain issues are placed on a list for refusal.
- Expatriation Tax when Returning to Your Home CountryWhen returning home from living or residing in another country, there are additional taxes that may apply to the person called the expatriation tax. This means that someone moving back to a country he or she lived in before moving away could be taxed for capital gains earned while not within the nation and then becomes a taxed resident once again.
- What You Need to Know about Tax Savings in the British Virgin IslandsThe tax savings in the British Virgin Islands has been reported as a promotion for the financial sector and with this location as a tax haven. This means it is important to know what this means, how these stipulations apply and who is affected so that citizens and others are aware of what is necessary in the British Virgin Islands for tax savings.
- All Banking and Finance Law Articles
Articles written by attorneys and experts worldwide discussing legal aspects related to Banking and Finance including: asset protection, capital markets, corporate finance, financial planning, financial services law, investment law, offshore accounts, private equity, project finance, public finance, securities, trade investment and venture capital.