Securities Law

The offer or sale of any ownership interest or evidence of indebtedness should be carefully reviewed by an attorney to ascertain whether or not a security is present in the transaction. If a security is present, San Diego Corporate Law may help you assemble the required disclosure documents and either register/qualify the security or exempt the security from registration/qualification. The proper handling of securities is important to:

• Legally raise capital from investors;

• Avoid criminal or civil liability for securities fraud;

• Attract investors by providing all appropriate documentation; and

• Minimize the risk of investor lawsuits through proper disclosure.

Contact San Diego Corporate Law for a free consultation and to discuss whether or not your offer or sale is a security, if the offer or sale must be registered and/or qualified or exempted, and what documentation and disclosures are required for the transaction.

 


General Information About Securities Laws

FEDERAL SECURITIES REGULATIONS

The United States federal government began regulating securities in 1933 in response to the financial scams and scandals leading to the stock market crash of 1929. The Securities Act of 1933 is a disclosure act, requiring the issuers and underwriters of securities to file registration statements, prospectus, offering circulars, advertisements, and intent to sell notices with the federal government. The Securities Act of 1933 creates liability for those who materially misrepresent or omit facts about the securities being offered.

The Securities Act of 1933 was closely followed by the Securities Exchange Act of 1934. While the Securities Act of 1933 regulates the issuance of securities, the Securities Exchange Act of 1934 regulates the secondary trading of securities, meaning, the purchase and sale of securities not involving the issuer of the securities. Most notably, the Securities Exchange Act of 1934 makes it unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

Other federal regulations followed the Securities Exchange Act of 1934, including the Investment Company Act of 1940.

STATE SECURITIES REGULATIONS (BLUE SKY LAWS)

All 50 states, the District of Columbia, Guam, and Puerto Rico have enacted state securities laws, commonly referred to as "blue sky laws". To varying degrees, these acts regulate offers, subscriptions, sales, and issuances of securities by businesses and individuals. Like federal securities laws, blue sky laws are intended to protect the public against fraudulent investment schemes through the full disclosure of any and all information an investor would find useful in making an informed investment decision. Blue sky laws also protect the issuers of securities and investors by regulating the commissions which may be lawfully earned by a securities broker.

CALIFORNIA SECURITIES REGULATION (CALIFORNIA BLUE SKY LAWS)

The California Corporate Securities Law of 1968 regulates all offers and sales of securities in California. All securities offered or sold must be either qualified with the Commissioner of Corporations or exempted from registration by a specific Rule of the Commissioner or specific law.

Exemptions from qualification do not limit issuer liability for fraud, either criminally or civilly, but instead merely exempt the offer or sale from the cost and formalities of qualification with the Commissioner. While federally the Securities Act of 1933 and Securities Exchange Act of 1934 are separate laws dealing with the issuance and secondary sales of securities, respectively, the California Corporate Securities Law of 1968 regulates offers and sales of securities from both issuers and secondary sellers.

Like federal securities laws and the blue sky laws of other states, the California Corporate Securities Law of 1968 is intended to protect the public from fraud and deception in transactions involving securities. The California Corporate Securities Law of 1968 achieves this regulation in part by providing statutory remedies in addition to common law remedies for those damaged in securities transactions which violate the California Corporate Securities Law of 1968.